Why do we need a binary options analysis?
One of the key factors that can make you successful in binary options trading is a full grasp of a binary market analysis. By successful, we mean having the capacity to make more accurate predictions and having higher chances of in-the-money trades.
To make it simple, binary market analysis refers to the practice of evaluating and analyzing a binary options trade even before you start the trade. It’s important to make an analysis of your trade even before you execute it so that you can gain more confidence in winning that trade. Furthermore, you have to ensure that you make a precise technical and fundamental analysis of the asset that you want to trade, giving you an increased chance of profiting.
Without a proper binary options analysis, trading binary options would seem more like a game of pure luck similar to casino games like the roulette.
Since binary options trading involves informed predictions of the behaviors and movement directions of an asset, it’s crucial to evaluate them technically and fundamentally. Having a well-rounded knowledge of how to a specific asset behaves allows you to perform a solid binary market analysis.
How to analyze a binary options trade
You can perform a binary options market on any type of trade – High/Low, One Touch, or Boundary/Range. But to provide an illustration, we’ll be using the One Touch trading type as an example.
Let’s say that you buy a “No Touch” option on EUR/USD on April 29, 2013. With a 24-hour expiry time, you predict that the EUR/USD would not reach the strike price of 1.4031 by the end of the expiration time. Suppose that you win the trade with a payout of $100, and the trade price of which is $55.65. Overall, you get a $44.35 profit from the trade.
Now, let’s dissect it into the two essential analyses that turned this trade into a winning one. The first thing to do is to find a market chart for the EUR/USD asset. Not all binary options broker offer charts so it’s important that you get a trading platform that has built-in charts.
Making the fundamental analysis
The asset’s fundamentals are always taken first before the technicals. So here in this trade, you need use the fundamental analysis first. This fundamental binary market analysis is mainly about the current market position of the asset based on real-time financial news updates.
During the period of analysis, Eurozone financial ministers were meeting to discuss about a rescue plan for Greece, which was then suffering from debt. Likewise, Italy was also undergoing crisis with a debt amounting to 600 billion Euros. These were obvious evidences that the Euro isn’t performing well, and that it would remain the same until the meeting was over. Therefore, you can safely assume that the Euro would not reach the 1.4000 psychological barrier before the meeting ends.
The technical analysis
Now, this is where you’ll need the charts. To confirm your speculation based on the news, you need to see what the price action indicates. You’ll see that the EUR/USD had been capped by a strong resistance at 1.39605 for three consecutive days. Hence, you can set a price barrier which you predict to be unattainable by the EUR/USD within 24 hours.
By the expiration date on April 30, 2013, you’ll be more than glad to see that the EUR/USD hasn’t reached resistance cap, resulting in your trade ending in-the-money.
So before you start your trades, make sure that you’ve done your homework – a binary market analysis. Analyze the fundamentals of the asset; be aware of what goes on in the market. Afterwards, validate your assumption with the technicals on the charts. Then, you can confidently trade the asset you’ve analyzed.