Fundamental and technical analysis in binary options trading

Ted Capwell Updated:

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.

analysis in binary trading

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.



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