When we think about binary options, the first thing that comes to our minds is technical analysis. Surely, trading binary options is fast paced and traders are expected to act quickly in the short amount of time. It is clear that the majority thinks there is simply no use to doing a thorough fundamental analysis when you are dealing with trading binary options.
Yes, technical analysis is required when it comes to binary options since they are primarily dealing with short term trading, but fundamental analysis can be beneficial as well. The chances are an asset will be affected by an outside factor and you might be able to detect it before it happens if you take your time and make use of fundamental analysis.
What is fundamental analysis?
To put it as shortly as possible, fundamental analysis is a trading method that examines an asset and the way it is influenced by all external factors. Fundamental analysis focuses on the impact that is made to an asset and how it forms the future movement in the market. Traders who use fundamental analysis follow the events on a global scale, as well as various economic events, information releases, interest rates, and so on.
How to apply fundamental analysis to binary options?
There are many tools available, depending on what you are trading, and they are able to help you out and calculate a price of an asset. Those trading tools can be found in various trading platforms and they are ready for use. The makers of trading platforms are aware of the importance of fundamental analysis and they offer notifications about various news releases. But sometimes they lack the information and you need to go to outside sources to find out more about a stock or a share you are interested in.
Binary options are traded quickly and you might think that you simply don’t have enough time to do all the footwork that is required. But following the news or insider stories about let’s say stocks you are closely observing are the proper way to go. You might be the first one to get the news about a major event within a company and that turn of events might influence the general direction and you will be prepared to act before it starts changing on the charts.
I hope that you are seeing why combining fundamental with binary analysis when you trade binary options is useful. You will be capable of being more accurate in your predictions and you will have an advantage over traders who dismiss fundamental analysis altogether.
Considering all possible influences on a given asset, it can definitely make you more successful in binary trading.
Conclusion
Ignoring this type of analysis is one of the biggest mistakes traders are making. Yes, it might take you some time to do it well and following current events might not be a walk in a park, but it is effective, even in trading binary options. Fundamental analysis might be the key factor you are missing from your daily trading routine and trust me, it can make a huge difference on your performance in the market.