Fundamental analysis in binary options

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Most of the information on the Internet, which describes the market and binary options in particular, is devoted to purely technical methods of analysis. It is the technique, that is, the analysis of the price itself, that is considered the most modern approach to trading on the market. Nevertheless, fundamental analysis has been and remains a tool for studying the most ins and outs – low-level processes of political and economic systems that directly affect the formation of market prices. Actually, further we will try to figure out what fundamental analysis is and how to apply it to the Binary Options market.

 

Analysis types

Fundamental analysis in binary options

Before describing fundamental analysis, let’s see what it is often opposed to. Unlike the foundation, technical analysis works on the assertion that everything has already been taken into account in the price. That is, the price is a summing factor, and we are trying to find patterns in its movement. However, there can be an innumerable number of such factors, including fundamental ones, and it is at least unreasonable to draw any definite conclusions, evaluating only the resulting indicator.

The foundation makes it possible to find the root cause in the price behavior, that is, to associate a specific event with a specific movement, having previously estimated the degree and scope of its influence. The result of the analysis should answer the question of what is happening in a particular company, country – any area of ​​influence, and how this will affect the future. The main difficulty of such an analysis is taking into account many factors, often conflicting with each other, and here some skills and experience are already required.

If we are talking about a currency pair, we need to look at the macroeconomic indicators of countries whose currencies are represented in a pair. The news (economic) calendar is the simplest and most accessible way to study fundamental factors. That is, we will analyze the news and their impact on the Binary Options market.

Economic calendar

Fundamental analysis in binary options

The economic calendar is the main tool for fundamental market analysis.

  1. On the calendar page, you can select a period for displaying upcoming events: today, tomorrow, the current week, or specify your own period;
  2. Further, the resulting list can be filtered by currencies and the degree of importance of news. It makes sense to pay attention to news of medium and high importance, they have the maximum impact on the market price.

The columns show previous performance, analysts’ forecast for future data and actual performance at the time of the news release. Large overshoots of projections usually create a large spike in prices.

Each event contains a detailed description of the news, including its impact on the asset price. In this case, if the forecasted indicator is significantly exceeded, it is worth entering the increase in GBPUSD.

Trading strategy

Fundamental analysis in binary options

One of the strategies involves entering the market immediately after the news is released. For example, if the result is positive for a currency, the rate will immediately begin to rise. In some cases, the growth is so intense that in just a dozen seconds the price can travel a distance equal to the average daily volatility .

It is simply unrealistic to have time to enter the market during this period. In order not to be mistaken and not to get an accidental loss, it is usually recommended not to enter the market half an hour before and after the news release. If you still want to trade on news races , then to reduce the risks of losing, you can use specialized strategies.

At the same time, it should be borne in mind that some brokers may turn off the ability to trade for a certain period before and after the release of important news, or greatly worsen the size of payments and the speed of order execution. This completely excludes the possibility of news trading.

This is why the main focus is on the long-term impact of news. You can analyze the long-term effects yourself using the TradingView service . To do this, open the chart of the currency pair you are interested in, then open the settings and uncheck the “Show Only Future Events” box. After that, the chart will display not only future events, but all events that have already occurred. This will help you determine which news has a long-term impact on price movement and which does not.

Fundamental analysis in binary options
For example, we noticed a strong deviation in retail sales from the forecast. Having determined the mood of the news, we can enter the increase or decrease in the price of the instrument. If you are in doubt about which direction the market will move, wait half an hour or an hour for the first reaction to pass and enter in the direction of the price.

Fundamental analysis in binary options
In this case, the maximum expiration date that we can choose is 1 month, since the next monthly report comes out on September 15th. But, most likely, choose the expiration time before the next defining event, that is, news that can strongly shift the market (and not in our favor).

Fundamental analysis in binary options

Conclusion

Fundamental analysis in binary options

Despite the fact that fundamental analysis provides reliability, it also requires perseverance and sober calculation. This trading style is not suitable for everyone, given the need for a very long expiration period. But, given that the dates of major events are known in advance, such trading requires a minimum of time from you to control positions. So, if the “old school” style is your thing, trading on the foundation will definitely appeal to you.

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