The nature of binary option is mainly a sort term trading where the most common is expiry period of 60 seconds option, traders are usually use technical analysis as their main decision making and in most cases they ignore fundamental analysis.
In the past decade, many of the binary option brokers offer not only main currencies as they used to, they expand their platform with more cross currencies (non USD currency pairs), Stocks, indexes and commodities such as oil, gold, silver etc.. , in addition to that, brokers offer more binary option types a trader can use such as ladder option, boundary option, one touch and more…
Why a binary option trader needs to know fundamental analysis?
A trader become a successful trader once he knows how to trade each binary option type, when to use it, which asset it better to trade and how much to risk – money management.
Knowledge is the set of tools for a successful trader, in many cases a trader is like a racing driver, he should take into account lots of information and to act at the exact moment, if we compare trading to racing cars, technical analysis is the road itself, you know what the road looks like you familiar with the curves, you understand what happened before in order to predict how to trade in the future, that’s way your first tool a trader must use is technical analysis, but, in a real race there are surprises, it’s impossible to know what will happen during the race, what obstacles a trader might to face off against, that is the reason it’s not enough to be familiar with the road, a successful trader must take into account and be prepare for the environment and atmosphere he act.
What is fundamental analysis?
Fundamental analysis is basically a scope of reasons that set the price for each and every asset, as differ from technical analysis where the prediction is based on chart pattern from the past, fundamental analysis actually provide the current price, all market ingridience are alredy calaulate in the asset price, the main factors of the Fundamental analysis are:
• Financial reports (Public companies, governments etc..)
• Central bank’s policy and statements
• Economy events (news and data releases)
• Market trends
Fundemantal analysis example
A major economy event that happen lately is the Brexit which caused to a sharp decline for the GPB & EUR currencies, indexes and stock market
If you were reading the news before the ‘Brexit’ you should know what are the chances of the British people to stay in the EU and what are the chances to leave, every fundemantal analysis discussed about each scenario and the effect for the overall market in the short and long term.
As a binary option trade I knew there is a good chance for a sharp move, at any direction, by using ladder option trade you could earn just from the volatile move on both directions (the GBP price increased significantly before it dropped.
Fundamental analysis takes the overall factors into account while provide a prediction to the known future events.
As a binary option trader, in order to get the information you need, you don’t have to follow every bits and bytes of the news, it is better to be aware in general for what is happening in the market and for the specific asset you trade for.
Best sources for fundamental analysis
The information surrounds us, there is no limit for news and events you can get from online websites and forums, TV shows and news channels, Radio and newspapers, in-fact, if you try to grab as much as possible you’ll eventually find yourself without any solid conclusion, flooded with information.
Therefore, our suggestion is that you’ll get the overall picture about the market atmosphere and traders opinion on the financial world in generally and particularly for the asset you’re going to trade on, moreover it’s important you’ll take into account all the events while understand we gathered here some of the most recommended online sites for you:
The site provides finance news and more important finance events
If you would like to be more specific for currencies here is the site for you
Also, in case you wish to learn more about specific finance subject or term you might want to visit www.investopedia.com
Fundamental analysis strategy for Binary option
The most popular binary options expiry time is 60 seconds and 5 min, only by using simple method you can become a successful binary option trader.
The fundamental analysis is based on market events, before you get into more details you should understand the market atmosphere, it will strength your decision for which binary option you should trade, when is the right moment and what type of binary option trade is best to trade.
After you get some information about the market it’s time to open the financial event calendar – http://www.forexfactory.com/calendar.php
Usually the more the event news is important it is more likely to experience a sharp move from the market, please note that each event is relate to different type of assets, usually when the event has direct influence on USD it will affect the overall market.
Take into account the right time zone – you can adjust the calendar to your timezone.
As a result of the events the market will react accordingly, basically you can use one of the three main binary option types:
1. Ladder option – for volatile expected move
2. Baundaty option – for non volatile expected move
3. One touch – if you convinced about the direction
Volatile move will usually occur when the result if far from expectation and prediction.
A successful trader knows how to combine between technical analysis and fundamental analysis
For more information about how to combine between the two Technics – Technical analysis Vs. Fundamental analysis