Market events are used often in trading because of the rallies that tend to ensue from a market event, attributed to trading volumes being greater during market events, with the subsequent momentum usually creating a breakout rally. However, breakout rallies can become quickly ominous to the traditional Forex trader when they rapidly reverse, and this is when novice Forex traders get their taste of what is referred to as the ‘siren call for novice traders.’ Both novice and professional Forex traders alike take little comfort at the reversal of a breakout rally that their stop losses actually prevent a loss. Stop losses serve an important role in Forex trading, but they are in no means acting as a true hedge. Here is where binary options differ – trading a market event with binary options allows you the means to hedge to reduce your risk because of two very important attributes. First, unlike conventional Forex, with binary options you trade without leverage. Second, also unlike conventional Forex, you can place trades in both directions so you can hedge your trade in the event of a rally reversal.

Let’s start an explanation of how this works by first taking an example of handling a market event breakout rally using a traditional Forex only trading method.  One of the most popular market events traded on is the US unemployment claims report, which influences trading volumes on USD related instruments.  The US unemployment claims report is published this coming up Thursday.  There are many traders active in trading USD related instruments, and as more investors join the rally, the rally usually continues.  Unexpectedly, the rally reverses. The reason for many reversals is that when more and more traders are profiting, then selling momentum builds.  As conventional Forex is always traded with leverage, any stop losses placed will result in a loss of money. Here is where the ability to place trades in both directions with Binary Options works to your advantage, and why using Binary Options to trade market events is less risky.

Let’s go back to the beginning of the announcement in our US unemployment claims report example with a Binary Option trade.    As the rally gets under way after the announcement, you can place a binary option trade in the direction of the rally.  If the rally should now unexpectedly reverse, you are covered, because now you can place a in the opposite direction when the breakout price is crossed back down. Effectively, you just cancelled your original trade by buying both sides of the trade, but since no leverage is involved (as was in a traditional Forex trade) your loss is usually less than 10% of your investment with using Binary Options. Less than 10% of an investment with Binary Options verses possibly greater than your original investment with traditional Forex is what can be called significantly less risky.  It’s obvious to see why increasing numbers of traditional Forex traders deploy Binary Options strategies when trading market events, because the name of the game is to successfully minimize risk if and when losses occur in trading.