In this introductory article, we will be covering fundamental analysis as it is used in binary options trading. This is perhaps the most important thing you will need to learn in order to become a successful trader because most of the fully-automated robots and signal services require at least a basic understanding of fundamentals before you can start generating consistent profits. For those of you who are relatively new to the investing industry, it should be known that there are several different styles of trading analysis that can be applied when investing online with binary options:
Perhaps the most traditional and widely used form of trading analysis would be fundamental analysis, which is the least technical form of trading analysis out of the three but requires the most common sense out of the bunch. To better explain, fundamental analysis is the analysis of an asset’s financial health, competition and press release. Perhaps the best advantage concerning fundamental analysis would be that it requires no use of a charting solution, technical trading indicators or any trading software.
How to do fundamental analysis?
An interesting realization regarding fundamental analysis would be that everyday most people around the world are unknowingly involved in it by simply watching the news. Any press release that can affect the value of an asset is examined. Another common form of fundamental analysis that is oftentimes utilized by binary option investors would be assessing an online financial portal such as Google Finance. Google Finance is perhaps the largest and most widely used online financial portal and there is a great reason for that. Google Finance not only provides investors the best outlet for fundamental analysis gurus, but they provide unparalleled data compared to other financial portals. While accessing Google Finance investors can see relevant and future news regarding any particular asset, live feed of an asset’s financial health and the ability to see past performance levels of nearly any investable asset.
Now one theory that is imperative to remember when it comes to fundamental analysis is price evolution. Price evolution can be better explained as any factor that can directly or indirectly affect the price of any particular investment asset. By applying this type of analysis, we as investors can better predict the price evolution of a particular asset, which will ultimately increase our chances of winning a binary options investment. Perhaps the best method for applying fundamental analysis would be to only focus on a handful of assets such as a couple currency pairs, a couple stocks and a commodity or two. That way you don’t become too overwhelmed.
Fundamental analysis: An example
A common example that we use when trying to better explain fundamental analysis is that you are a binary options investor who has been a long-time Apple iPhone supporter. You currently have the iPhone 6S and you know that tomorrow the iPhone 7 will be announced and released to the public which will more than likely cause a sharp increase in the value of the Apple stock. By applying fundamental analysis, you can predict that the price of the Apple stock will rise after the announcement of the iPhone 7. You could then place numerous call investments just prior to the announcement so that your investments expire in-the-money giving you an extremely nice return.
Fundamental analysis is one of the most effective and traditional forms of trading analysis used by binary option investors around the world yet it is oftentimes the most overlooked trading method. This can greatly be credited to binary options investors stubbornness in finding the “Holy Grail” of trading strategies which unfortunately does not exist. Every trader should be well-versed with the fundamentals of the assets he is focusing on. Even if you are using a semi-automated robot such as Mike’s AutoTrader, you should not trust the machine blindly. Conduct your research and invest wisely.
Listen to Michael Freeman explaining fundamental analysis: