The Beginner’s Guide to Market Analysis

Understanding Market Analysis in Trading Binary Options

market analysis main Assets are influenced by various factors and binary options trader needs to fully comprehend the importance and application of market analyses into their trading activities. Successful traders are those who are always on the lookout for market reviews, technical and fundamental analysis.

Introduction to Fundamental Analysis

Fundamental analysis, as its name suggests, allows a trader with factual data regarding any market events in the most simple and basic form. Overall, it outlines the evolution of the markets and consists of a solid framework to understand the price movement of assets. All materials included in a fundamental analysis come from news reports, current events and other statements regarding the global market. Anything that can or has the potential to influence an asset’s value can be considered as such.

Practical:

Analysts, who are concerned with the currencies or forex exchange market, will focus their attention on public reports, official statements such as GDP forecast and figures and other relevant data released by central banks or any other authority. For example, if a trader wishes to open positions for the EUR/USD pair, it is very likely that he will consider recent reports such as the Fed’s meetings or any other policies that could affect the pair. Moreover, he would also consider events within the financial world that can have a direct impact on either the base or counter currency. As a trader evaluates the euro, he also has to look into the countries that make up the euro zone. Hence, they will be able to understand which countries are high performance and which ones pose threats to the single currency’s movement. However, fundamentals are subject to various interpretations and different investors will interpret an official document in their own way. Therefore, anyone using the fundamentals to trade binary options should be familiar with the asset’s movement and its responsiveness to market data. Although fundamental analysis allows traders to understand economic conditions and other financial happenings, traders are advised not to rely solely on it to gear their binary options trading strategy. With so much information available under the fundamental headline, novice traders can only get confused and undergo information overload and that is why they are used in conjunction with technical analysis.

Introduction to Technical Analysis

In its simplest form, technical analysis is the method used to analyse statistics and other numerical data so as to speculate over the directional movement of a particular asset. Various methods are used in technical analysis and the indicators are proven mathematical calculations based on price and volume activity. The first and foremost advantage is that traders have dynamic outlook on the markets. When using fundamental, traders look for historic data to see if there is a trend occurring. The different price points over time will establish a trend and the trader will use the latter to determine whether to execute a call or put option on the particular asset.

Practical:

 If a trader is interested in trading the EUR/USD currency pair, he will likely to verify if any trend has been developed. By watching the moving average for the past two days along with average movement for the last five days, the trader will have an idea of the movement of the pair. The moving average will indicate whether the trend is upward or downward and allow the trader act accordingly. An asset is known to be in an upward trend when the price is above the moving average and that the latter is leaning upward. Binary options traders usually open trades with small timeframes and is a great opportunity for those who know how to follow technical. Practical:  article-5-sub-image-1        article-5-sub-image-2 If an option will expire in 15 minutes, then the trader will need to look at the chart for the last 45 minutes. If the actual price is higher than the opening one, then it is more likely than the price will down again in 15 minutes. Therefore, it is advisable to buy a put option. However, if the current price is lower than the opening one, the trader is advised to go for a call option, as the price is more likely to take an upward trend. This technique is useful only when the market is calm with low volatility as any major events can shake up the market and cause disruption in the asset’s price movement. When trading binary options, traders should not worry about the mathematical operations behind the technical analysis. All of these have already been simplified by experts and analysts and most binary options brokers offer various charts and graphs to support their review. Moreover, some binary options platforms offer trading signals service to traders to help them achieve higher success rate.

Understanding Trading Signals

Trading signals are technical indicators that call traders to a specific action, by outlining the best possible entry and exit points for profit maximization and reduction of loss. With the increasing popularity in binary options trading, several platforms are now offering this particular service and have adapted the traditional forex trading signals to cope with the binary options trading environment. Signals provided by BigOption trading platform are very easy to understand and any trader, irrespective of their experience, can use them to their advantage. Usually, any trader who registers for the signal service will receive daily updates straight into their inbox and all they have to do is to act accordingly.

Practical:

The trader receives a signal in his inbox which suggests a call option for the EUR/USD and a put option for Gold. The trader can refer to the fundamentals and the relevant technical as a support in making a decision. After proper analysis, the trader can act according to the signal’s suggestion. Fundamental, technical analyses along with trading signals are various trading tools that traders can use to understand the market. Such market analysis is extremely important for binary options traders before they engage into any trading activity.
Priscilla Camryn By: Priscilla Camryn
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