Fundamental and technical analysis in binary options trading

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker 2020!
    Free Trading Education!
    Free Demo Account!
    Perfect for Beginners!

  • Binomo
    Binomo

    2 place in the ranking!

Market Analysis For Binary Options

Remember back when you enrolled yourself into the School of Pipsology, we talked about “The Big Three” types of market analysis. In case you forgot, they are:

Fundamental Analysis

Trading the News

One way to make use of fundamental analysis would be to go with a trade-the-news strategy.

For binary options, this can be particularly effective when you trade simple Up/Down options.

After all, you would simply need to get an idea how price may react to better/worse than expected data and how strong the reaction may be. You just have to be confident that price can reach the strike price of the option that you bought.

For example, you plan to trade the Australian retail sales report. Let’s say you have a bullish bias on the results.

Chances are that a better-than-expected result will spur the Aussie to new highs, so you would look to buy a “call” option on AUD/USD.

Now let’s say that, as you expected, we saw a better-than-expected result. Luckily, AUD/USD also rose, rising above the strike price. Paycheck time, baby!

Of course, there are a couple of factors to take into consideration when playing the news.

First is the potential for volatility. When playing a news report and buying a binary option, you have to be fairly confident that the event will spark enough volatility so that price can reach the strike price and stay above/below that level.

If you try trading a report that rarely causes a ripple, you’ll be throwing money down the drain.

Second, you have to factor in the time component of binary options.

When trading binary options and implementing a trade-the-news strategy, you may also want to consider going with one-touch options since price would only have to touch and not necessarily close at a particular level.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker 2020!
    Free Trading Education!
    Free Demo Account!
    Perfect for Beginners!

  • Binomo
    Binomo

    2 place in the ranking!

You can also try the Out of Range options if you expect the price to move with strong momentum away from its previous range.

With this option you don’t have to pick a direction, just decide whether or not the market will move big time in one direction or another.

Technical Analysis

Love using those fancy-schmancy indicators like moving averages, Bollinger bands, and Stochastic?

Don’t be afraid to slap these indicators on your trading charts when you plan to trade binary options!

These are used across all sorts of trading markets and not just spot currencies.

Just make sure you have a good understanding of how each indicator works before incorporating it into your analysis.

Studying technical levels and inflection points may also prove helpful when you trade binary options.

Let’s take a look at this example on GBP/USD.

Price has just broken down from a double top.

With this behavioral pattern, price normally continues to trade lower at a distance equivalent to the height of the double top.

One way you could play this is by taking a One-Touch trade.

If the strike price that your broker offers is somewhere between 1.5450-1.5550, which is within the height of the double top, buying a “put” option might be a setup worth considering.

Sentiment Analysis

Sentiment analysis is the task of measuring the market’s current “feeling” with regards to broad risk flows.

Are traders confident in buying up risky assets or would they rather reduce risk by buying safe-haven assets or going into cash? This type of analysis will prove to be particularly useful when trying to hop on trends.

Will EUR/USD break for new highs? Or do you think the trend is overdone and there’s not enough momentum? You can use sentiment analysis to gauge how the market is feeling.

If you’re fairly confident that market sentiment will favor a risk-on environment, you could consider purchasing a “call” option on a risk currency or asset (e.g., Australian or New Zealand Dollar, Equities, Commodities, etc.)

On the flip side, if you think a reversal in sentiment is in play and depending on how overdone you believe the move is, you could consider purchasing a “put” option on those same risk currencies or assets.

Combination

Just as in spot forex trading, it’s not necessarily a case of choosing which type of analysis you’re going to use because they’re not mutually exclusive.

In fact, you can combine all of these types of analysis to form the basis of any trade that you take.

Fundamentals can help give you a bias as to what direction you want to take, while technical analysis will help determine the chances of the market reaching, breaking and finding support/resistance at a certain price.

Meanwhile, sentiment analysis may let you know whether the market is in a risk-on or risk-off mood.

In the end, the key is for you to learn from all your mistakes and gain experience. Over time, this process will help you fine tune your analysis and help you develop good trading practices.

Fundamental and technical analysis in binary options trading

Technical analysis in binary options trading is based, in fact, on the processing of statistical information, which is displayed in a graph. Simply saying, this analysis will use special tools in online mode. The essence of technical analysis is to find patterns that allows to predict the best period to enter into the position. Here you can use levels of support / resistance, different patterns or shapes, and indicators and much more. As an example, will serve as a live graph, with which it is possible to predict the price movement of the underlying asset in the future. This is a definite plus in online Commerce. Due to this, today, technical analysis is considered indispensable in the practice of the majority of investors and traders, primarily in short-term trade.

Fundamental analysis is used in assessing the specific interest of the trader in the specific industry or the economic situation of the company. That is, the basis of this type of analysis is the analysis of investment attractiveness. Using fundamental analysis for binary options trading investor considers the asset based on embernet the impact of changes in the external and internal factors on the change in its price. In other words, fundamental analysis provides the opportunity to examine the adequacy of the current prices of the shares of the company, in which trader plans to invest. Also it allows to determine whether it is necessary to include these assets into long-term investment portfolio. Traders use such fundamental factors as: economic activities of the company or key indicators of the economies of the leading countries that have a direct impact on the international economy.

When it is better to use each of these analysis?

In fact, technical analysis is used by a trader no matter what style of trading binary options he uses. Difference will be only that sometimes it can be used not as the primary method, but rather as a complement to the ongoing fundamental analysis. For example, the trader trades intraday or in the short-term period, then he will not take into account the fundamental data. Right here the entry point in the position will be based strictly on the basis of technical data. But in the mid-time trade, as a primary method, you can use indicators of fundamental analysis, since this trade includes the management of positions up to 3 months. So, it is possible to use technical analysis as a subsidiary.

You should take into account the fact that the use of technical analysis in binary options trading will be significantly different from trading on any other financial market. If to trading on the Forex market, technical analysis will be focused on determining the point of trade entry and exit points from it. But trading at any other stock exchange you only have to predict the direction of price movement of options. This distinction allows beginners very quickly learn the technique of trading on binary options and start to earn on it.

So, let’s consider next situation for a better understanding of this topic. Let’s just say you have decided which shares interest you. Therefore you understand that except you this asset would be interest to other participants and major players of the market. The reasons for this strong interest can be mass, even the situation of a purchase or planned acquisitions of selected company to larger ones. However, you realize that the fair value of these shares of this company should probably be much higher than the present level. Therefore, relying on fundamental analysis you are definitely interested in them. Following this, you need to determine the point of entry with a very short stop point – which is already evidence of use of technical analysis. This point should be determined with the purpose of protection from unwanted results (loses). After all, impulse purchasing at a strong asset price rise without appropriate correction can lead to a loses. This situation illustrates how the trader can simultaneously use these two types of analysis.

In case of long-term investment, where the period of the holding shares may vary from one year to 10 years, or even more, a reference for buying it will be, actually a fundamental analysis. Because of this period, it requires analysis of the financial condition of the company, the aggregate economic state of the whole industry and/or alternatively, the search for undervalued securities of other companies.

Personally we advise you to combine these two types of analysis when forming an investment portfolio, especially, based on long-term assets. Let’s consider the following situation, in which you again are determined with the choice of relying on fundamental analysis. Logically you will not immediately invest the money in buying shares, but only at the moment when the price reaches the desired level. Hence the entry in position will be done when you see the suitable price, that may occur, as an example, at the approach of its values to the lower local minimum (lower boundary). But don’t take this as an advice or method, it’s just a simulation of the intended situation with long-term investment. In fact, there are much more models and styles than enough, based directly on the investment objectives of the individual investor. Therefore, firstly try to examine all necessary materials, make an adequate investment plan based strictly on your goals and objectives, before making any investments on a long term basis.

In conclusion, we want to note that technical analysis in binary options trading is as great and sometimes even indispensable tool. Using this it is possible very accurately to determine market trends. That is, it helps to predict the direction of prices of different assets, and therefore, open positions in the most favorable moments. But remember that technical analysis will work for you most effectively in the short term trade!

As for fundamental analysis in binary options trading, almost always it will be possible to identify the time for bargains. But only when it is conducted properly, given the variability of the political and economic situation in the world. According to this, the effectiveness of fundamental analysis would be most manifest in the long-term investment.

WE OFFER YOU TO TEST ANY TRADING STRATEGY. TRY IT ON A DEMO ACCOUNT FROM TRUSTED BINARY OPTIONS BROKER IQ OPTION BY CLICKING ON THE LINK BELOW:

“General Risk Warning: Binary options trading carry a high level of risk and can result in the loss of all your funds.”

Technical Analysis

Binary options trading is popular in online investment world thanks to possibility to achieve high payouts while trading with assets, such as stocks, currencies, commodities and indices.

Traders in South Africa have on their disposal opportunity to use either technical or fundamental analysis to increase the chances of winning in binary trading.

In this article we will take a closer look of importance of technical analysis in binary options trading.

How to Use Technical Analysis in Binary Options Trading?

Technical analysis is often used in binary options industry primarily because it is based on financial charts. Key element of successful trading with focus on technical analysis is having more knowledge regarding binary trading signals. If traders wish to achieve high returns, they should be able to identify the market trend and stay on the right track.

Trading on technical strategy can be awarding for traders in South Africa if it is used properly. First thing is to educate yourself to have enough trading knowledge to know when to place a trade and how to use different charts in the trading process.

If you are serious about trading binary options, then you need to be quite prepared for the trade itself. It is very true that only proper preparation can help you to earn a lot of money. That is why a lot of traders depend upon the technical analysis.

This is the analysis of the asset prices in order to find out about the future movement of the market. It is not something very easy, but if you are capable to do that, then you will be able to guess better. Your prediction will translate into better earning and a more money.

There are a few type of technical analysis available for the help of the traders and you are about to discover about them.

Trend Following

This is the type of technical analysis where the historical trend is followed to find out about the trend of the market.

It is thought that if the historical movement if the market can be read properly, understanding the present market will become a lot easier. Your prediction will have more depth and more confidence.

Momentum

Momentum in technical analysis is also known as the moving average convergence divergence. Under this method the price of the asset is determined by the parent of its rising and falling within a certain time period. It can be a long time or a short time.

Both the ways, you will have an average reading of the market which will help you to guess about the price movement better.

Mean Reversion

This is the type of technical analysis where the mean of an assets rather the price of an asset is identified. If you are having problem in understanding then a little explanation will make things simpler.

The price of an asset is rising and falling all the time, so there is a need to find out the mean and if the price is going to settle down by that point. This one will help you to find out a strong point based on which you can guess better.

Pattern Recognition

This is the type of technical analysis which will help you to recognize a pattern among the current trend. If a pattern can be identified, then it will become easier for the trader to make his prediction better and take more risks.

Support and resistance

Although they cannot be identifies as technical analysis, but nonetheless they are quite important.

For instance, support is that level which makes sure that the price does not go under it. If somehow the price goes below this level, it will come above very soon. Resistance is the level which will ensure that the price does not go beyond this level.

So how to set up support and resistance strategy?

Traders should know that this strategy is helpful in evaluating where to enter or exit when establishing the positions. Also, in case resistant or support line breaks, it doesn’t mean it is deleted. Once crossed upside, resistance becomes support.

The thing regarding this strategy is that they necessarily don’t reveal direction of asset price. However, they help traders to define important positions and right timing for Call or Put position.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker 2020!
    Free Trading Education!
    Free Demo Account!
    Perfect for Beginners!

  • Binomo
    Binomo

    2 place in the ranking!

Like this post? Please share to your friends:
Binary Options Online Trading
Leave a Reply

;-) :| :x :twisted: :smile: :shock: :sad: :roll: :razz: :oops: :o :mrgreen: :lol: :idea: :grin: :evil: :cry: :cool: :arrow: :???: :?: :!: