Those of us familiar with trading know that there are two main schools of thought, fundamental analysis and technical analysis. Fundamental analysis relies on looking at the facts behind an asset’s performance. These factors include any data or information that is publicly available regarding the asset. For a company’s share of stock this might include the company’s earnings per share projection or its quarterly profit/loss results. On the other hand, there is technical analysis. This information typically is made up of information that can be determined by a charting package. It can be a formula that is applied to the graph, such as the MACD indicator, or it can be a simple pattern that the chart forms visually.
So which of these methods is the best for analyzing binary options? The answer is: both. Fundamental analysis will give you information regarding the overall health of the company or other underlying asset. If you are trying to ride a solid trend, this method will give you a very clear idea of what that trend is and will help you to better predict the short term future since you will be more aware of the factors that do have the potential to cause price changes. A poor quarterly report, for example, can cause prices to steadily drop for a few days. Having this information available at the beginning of the trading day can boost your earnings. This is especially true if the outcome of that report is hinted at before the actual release.
Technical analysis is by far the most prevalent form of trading binary options. This is because charts have become so easy to use. Anyone with computer experience can find a price chart and make some simple graphs with it. These graphs can be a huge help to a trader because so many people will be using them. In other words, because they are so widely accepted as being helpful, they become even more helpful because there is a general consensus about how a certain pattern or calculation will affect the asset’s price.
Combining the two of these methods will help you with both short and long term binary options. If you are able to get more data than your competition in this market, you will have a better chance of outsmarting them and making money while they do not. Binary options are a simple and effective way to trade, but you do need to do your research before jumping in.
By: Richard Sobin.