Binary Options and Fundamental Analysis

Binary Options and Fundamental Analysis

Submitted by adil on Wed, 12/10/2014 - 12:40

There are a number of approaches to follow in binary option trading. With time as you gain more experience, you can start to use some of the short and long-term strategies to help you improve your results. A long-term expiration time is that of a weekly option where the option expires at the end of the trading week. Fundamental Analysis is one technique which is used in long-term binary option trading. It basically deals with the evaluation of an asset by looking at all the internal and external factors that could influence its price. But with time, there is a decrease in following this trend. Using fundamental analysis is no longer considered to be a suitable mechanism for binary trading.

How does fundamental analysis work?
In fundamental analysis, you basically evaluate any asset by observing the various internal and external factors that can have an effect on the price. These factors may include interest rates, financial policy and overall local and global economic and political conditions. There are a number of events which are interrelated, affecting the price of different assets and the different asset classes. Most people are unable to differentiate between fundamental analysis and technical analysis. In fundamental analysis, the focus is more on the events which tend to bring fluctuation in the prices.

Why fundamental analysis information is critical for Binary traders?
As the most critical factors that influence the market trend in the market include interest rates and the financial policy, these factors tend to have a long-term impact on trading activities. They have the capability to influence the investors as well as the trading and has a long-term impact on the supply and demand of commodities or currencies. As they can create a positive or a negative sentiment therefore serve as a very crucial information for binary option traders who are looking forward to a long term investment. These factors tend to influence the current trend for binary trading during the meetings of central banks where even the smallest indication that rates may rise or fall will affect the fundamental demand, and in turn the value of currency. Here it is important to note that interest rate may rise up or fall down and effect the value of currency.

Why Fundamental analysis is not the right way for Binary option trading?
The financial markets are often driven by sentiment with a pessimistic market reflected in a downward economic trend. It is very important for a fundamental analyst to associate an overall view of all that is occurring in the world with what is happening on a much smaller scale with regard to specific assets. For success in binary option trading it is essential that the traders should access the purchasing options for longer than the intra-day fluctuations. As the price of commodities and currencies tend to have a great influence on trading activities. A good example for this is gold, as the price changes dramatically based on the economic conditions. If long term binary options trading is done in such a time periods where the value of currency is not stable, there is a likely chance that the trader or investor may suffer huge losses.