Profitable binary options trades are typically the direct result of accurate analysis. Fundamental analysis is the process of studying current financial news reports, with the goal being to determine the current and upcoming direction of asset price movement. This type of research is significantly less complex than technical analysis, yet it can be just as effective when applied correctly to your trades.
Analysis and Expiry Times
The analysis process should include some consideration of the expiry time you’ll be selecting. With extremely short-term trades, only the most current market conditions will need to be taken into consideration. With long-term trades, a broader view is going to be required. Note that when entering price movement predictions that are based on economic data releases, the impact that the data has on investors is likely to be short-lived. Not only can strong sentiment start to fade over time, it only takes the release of new data to completely change market conditions.
Importance of the Asset Index
The time commitment related to the task of completing fundamental analysis can be reduced by familiarizing yourself with the assets made available by the binary options broker you’ve chosen to partner with. When you know exactly which assets you can enter into contracts with, you’ll know exactly which pieces of financial news to pay attention to. Most modern brokers now offer at least one-hundred underlying assets, with some offering even more. When just starting out, feel free to focus on only a few assets that you feel comfortable trading with.
Market News and Reports
The internet is loaded with free financial news. Major finance news providers such as Bloomberg and Thomson Reuters have been around for quite some time and have proven themselves to be reliable sources of information. Market news can also be found on television, newspapers, and magazines. While these sources can provide factual information, they may not always provide reports far enough in advance for you to take action. Try to select one or two reliable sources that post the latest news promptly.
Analysis and Trade Types
Both favorable and unfavorable market reports have the power to shift asset prices. Whenever sentiment is strong, the basic “Put or Call” trade type is a fine selection. One Touch and Pairs trades can also be selected during times when an asset price is steadily climbing or falling. When prices are steady, or range-bound, trades such as Boundary and No Touch are going to be the better selection. The trades rely on a reduced amount of price movement if they are to be profitable.
Utilizing the Economic Calendar
There are several key pieces of information that are provided by an economic calendar and each of these can be directly applied to fundamental analysis. Basic economic calendars provide the dates and times for the release of economic data, as well as company-specific financial reports. The more advanced versions will also provide a forecast of what the new data is expected to reveal, along with the actual data numbers once they are released. A comparison of the two should quickly tell you what to expect in terms of changes to investor sentiment and subsequently, changes to asset prices.
Fundamental analysis should always be your starting point when searching for lower-risk trades. Whenever sentiment is strong within the markets, expect to discover that the task of predicting the upcoming direction of asset price movement is much simpler. Technical analysis should not be ignored, but there is little need to dig into these details until after you’ve used market news to pinpoint a binary options trade that is likely to finish in the money.
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