How Can Technical Analysis Benefit In Binary Options
Being a binary options trader, you need to make predictions regarding future cost movement of any asset. In regular trading, different ways are available do that, but the most famous is fundamental analysis. It examines dividends, earnings, research projects, new products, etc. about an asset. Unluckily, fundamental analysis isn’t adaptable to the binary options. The single way to be a successful trader of binary options is to utilize technical analysis.
Let’s see how technical analysis benefits your binary options trading: More you shorten time period, more erratic and random an asset’s cost moves. These movements no longer are influenced by any fundamental reasons, but actually are the consequence of unpredictable, random events that affect relationship of demand and supply.
Someone might wish to purchase a stock as he has a little money left over, somebody else may sell as he needs money. Such events aren’t logical always and too casual to be predictable. Therefore, traders turned up with a method of dealing with unique challenges of the random price movement: Technical analysis. It’s based on 3 fundamental assumptions about price movements and markets:
Market Movement Discounts Everything
The price reflects all related information that’s influencing the rate of an asset already. It’s therefore not essential to know the fundamental information about any asset. By analyzing price a trader may find out what the investors think of an asset, and how the price will go on in the future.
Prices Move In Trend
Technical analysts think that price moves in trend. Trends are crisscross movements in certain directions, either down, up, or sideways. On diverse time scales, the asset can undergo numerous trends simultaneously, often through trends in diverse directions.
History Will Definitely Repeat Itself
Investors will repeat behavior of the investors before them. This means, although market movements are irrational and random, they can be easily predicted if the trader recognizes the patterns and gets the correct conclusion from them. Results of this statement are candlestick patterns and trend analysis.
Making good investments, particularly on short time scales like with binary options, virtually is impossible without the technical analysis. Therefore, any new trader needs to invest lots of time in order to master the fundamentals of technical analysis. A successful binary options strategy should be based on the technical analysis only.
Why fundamental analysis isn’t workable with binary options?
Though fundamental analysis can forecast whether an asset’s rate will fall or rise over the years, it can’t predict whether the rate will fall or rise right now. Even if there is any new news, it can’t make a prediction regarding how far rising profits will make an asset’s price rise today.
That means, being an options trader you need to throw all the classic assumptions regarding trading stocks. You should never forecast rising rates for a stock as the company has excellent products and an increasing loyal customer base. These things won’t affect the asset’s price on time frame related to binary option.
As you can observe from looking at wavering line of an asset’s historical prices, the best stock also will have falling prices periods, and the worst stocks also will have rising prices periods.