How To Forecast Price Action
Quarterly financial reports are powerful pieces of information to all who trade binary options. Or at least they should be. These reports often provide excellent opportunities for market entry, and can even profit multiple chances to enter into profitable trades. When major companies publish their financial data, it is almost guaranteed that share prices will start to move. Here, we take a look at exactly how to use that data to lock in profits on a consistent basis.
Similar to economic data, quarterly financial reports are (often, but not always) included in an economic calendar. Depending on which calendar version you use, past, present, and forecast data may be included. Market analysts often provide their forecasts for what the new data will reveal. At times, these predictions are quite accurate, while other times they are not. It is important to note that many investors do pay close attention to these forecasts, and are apt to react rather strongly when the actual numbers are far from the predicted numbers.
As a trader, you’ll want to note variances such as the difference in data from one quarter to the next, the difference year over year, and the projections for the future that are issued by the company that is reporting. The goal is to see if the data will lead to either positive or negative sentiment within the market place. After all, it is how investors feel about an asset that truly controls price movement. Correct assessment of sentiment will help you to profit greatly from binary options trading, but you don’t have to do it all on your own. Market data such as financial reports will help.
So, with that in mind, let’s discuss how to take quarterly financial data and turn it into profits. It’s actually quite easy to do. The task simply includes staying on top of the release of quarterly data, and then using the information to determine what investors are going to do next. Typically, positive data leads to an increase in share prices, while negative data leads to a decrease in share prices. For a forecast of a price increase, a Call option should be purchase. A Put option should be selected for a forecast of a price decrease.
Things can be trickier when the new data is simply in line with expectations. At times, this can be viewed as either positive or negative, depending on whether or not the forecasts were for the new data to be favorable or unfavorable. Other times, meeting expectations will mean that there is no major change in asset price. In this case, price movement may be flat. There are two choices here – either move on to a different opportunity, or select a trading instrument such as Boundary, Range, or No Touch. These trade types rely on reduced price movement and therefore can provide profits during times when price action is flat.
The bottom line is that quarterly financial data is important and can provide you with a multitude of profit opportunities when trading binaries, so you’ll want to make use of it. Often, profit, loss, and projection data will sway the market in a very predictable way. During these times, trade. When the data causes too much indifference, move on to something else. Market news and reports are tools which should be referred to daily. The decisions that you make each day and the tools that you use will determine just how good of a trader you actually are, so make use of everything at your disposal as you go about your binary options trading career.