Binary options are prohibited in the European Economic Area. Between 74-89 % of retail investor accounts lose money when trading CFDs.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

How to Apply Fundamental Analysis in Binary Options Trading

How to Apply Fundamental Analysis in Binary Options Trading

When it comes to methods of analyzing the market movements in binary options trading, most traders focus solely on technical analysis. This is mostly because binary options trading is relatively short term in nature, therefore fundamental analysis doesn’t seem very important as it does in a more traditional way of trading.

With that said, it is indeed crucial to use fundamental analysis in binary options trading as it offers a much wider perspective, especially in conjunction with technical analysis. The fundamental analysis evaluates a lot of internal and external factors such as company information and status, and big market events which can all affect the price changes, among many others.

Ignoring the fact that fundamental analysis has a potentially big impact in binary options trading means that traders are not able to take advantage of all the information that can be acquired through fundamental analysis. Doing both extensive technical and fundamental analysis before placing a trade should be seen as a natural step to maximizing the chances of achieving the best possible results.

In binary options trading, precision plays a big role. Using fundamental analysis can help traders make much more precise and consequently accurate moves that rely on much more than just technical analysis, which on its own as we saw, is not enough. Seeing that binary options function of the basis of predicting the asset price movement it is so important to keep in mind that a huge variety of factors can influence price movement. For this reason, traders are encouraged to use every possible available tool to help them make the prediction as accurately as possible.

Natural events in Fundamental analysis

Many of the underlying assets available on various binary options broker platforms are largely influenced by different natural events. Those events range from earthquakes, floods to other natural disasters.

What exactly does that mean and how important is that information for a binary options traders? Well, let’s say a huge flood occurs that directly impacts produce such as wheat or corn. It is expected that the event will cause the price of those grains to rise since now there may be a shortage on the market. That’s a pretty logical supply and demand situation. This information is something that all binary options traders should keep in mind as these types of natural events happen quite unpredictably, but when they do they usually have an impact on the market movements.

Obviously, some events can be predicted more easily and measures can be applied to minimize the potential damage. Others, however, are not so easily predicted which can cause the instability of an affected asset or multiple assets. For this reason, beginner binary options traders should be aware that every information about the market events and general global changes should be tracked seeing that they can and usually will have an important impact on the values of underlying assets.

Political situations in Fundamental analysis

Apart from natural disasters, there are other types of events that can influence market fluctuations. Political events are one of those that have a great impact on the global markets and consequently asset price movement. War, refugee crisis, oil, governmental changes, or any other type of event that has its basis in the political framework can potentially influence binary options traders and their binary strategies.

Traders need to be aware of those types of changes and how they impact the global markets in order to shape their binary investment strategies accordingly. So, it is our advice that traders keep track of the market news, especially big changes, so they can try and predict the price movement of a chosen underlying asset.

Economic data as a huge factor in binary trading

Economic data is also one of the factors that can have a great impact on the overall market fluctuations. When companies and governments release certain data to the public, that can have a varied effect on how binary options traders need to calibrate their approach to binary options trading. Economic calendar, that some binary options brokers offer as a tool, offers information on all important economic data release which can be of great help when planning your trading moves. Economic data that needs to be included in the analysis is namely Gross Domestic Product, interest rate, and unemployment rate. These are considered to be of the utmost importance to binary options traders and they should always be taken into account when planning your trading moves.

Gross Domestic Product

Gross Domestic Product is one of the key measures that indicates the economic wealth of a country or a region, by determining economic performance.

Interest rate

Interest rate describes the amount of money that banks pay to clients, whether to physical persons or other organizations, as an incentive for saving their money in the bank. The higher the interest rates the higher the currency level of that particular country.

This makes the foreign investors want to continue to keep the specific currency as it rises. This measure is used to apply changes to the economic situation of a country. This is obviously important to binary traders if their preferred asset type is currencies. Even if you have decided not to trade currencies, it might be a good idea to track interest rate changes through news as they can potentially have an impact on other assets as well.

Unemployment rate

Unemployment rates are one of the measures that clearly and fairly accurately can show the economic status of a certain country if you are able to analyze it correctly. High unemployment rates obviously indicate a poor economy, which would by association mean that low unemployment means good, stable economy.

However, that is not necessarily the case. Low unemployment rates can also mean that their companies could potentially stop employing people if they face a crisis.

Check the latest unemployment rates in European Union.

As we can see, the economic calendar along with its important measures can be of a significant importance when it comes to data that deals with market events.

This is something that most beginner traders will find hugely helpful for the trading process as it assists in organizing and developing an adequate financial strategy.  It can also possibly help maximize traders potential for profit when it comes to binary options trading.

Designed by Freepik