We earn money on fundamental analysis
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- For beginners
Fundamental analysis is one of the most effective how to make money on binary options. It is believed that this requires a lot of experience, but you need to start, this article will help you to be one step ahead of others.
The purpose of any market analysis is to forecast price movements. The Dow Theory behind technical analysis states that "history repeats itself" and "price includes everything."
You can look at the indicators for a long time, but the change in the balance of buyers/sellers is determined only by global economic factors that directly affect the stock and foreign exchange markets. Fundamental analysts adhere to the efficient market hypothesis and assume that the market is constantly in search of fair value – deviations from it can be used to search binary options forex signals.
When the current price is higher than the “fair” - the asset is too overbought, the price should go down - we are looking for entry points for the PUT-option. When below, open only CALL-option.
Moneymakers with their speculative volumes constantly create a market imbalance, forcing a lot of small players ("market plankton") to move in the right direction.
You need to decide on the terms. So:
Fundamental analysis is auto binary signals or trading strategy based on macroeconomic, geopolitical, and natural factors, statistics, and the actions of Central banks and government regulators. Other events and patterns that affect all financial markets: stocks, commodities, currencies, companies, and economic sectors.
Learn more about how it works
Not all information exerts a strong enough "pressure" on the market. Usually, the predicted factors are already taken into account by the price, can not cause speculative fluctuations or reverse the trend.
The fundamental analysis of an asset begins with determining the list of factors that most affect it. Each of the following sections will be given further consideration in separate articles, but for now we will focus on the general theses.
- Comparison method. The cumulative influence of statistics from leading EU countries on the exchange rate of the euro against the dollar.
- A variant of induction and deduction. An example is complex statistics, statistical reports of companies, the impact of the stock market on the dynamics of commodity currencies.
- Correlation method. An example is the correlation top binary options signals of the AUD / USD currency pair to the price of gold or the Canadian dollar to oil.
- Grouping and summarizing. Example: complex indices of currencies of developing countries that affect the overall trend of the region.
- Seasonality. Example: weather conditions affecting agriculture, increased purchases on public holidays, purchase of foreign currency for payments during the financial reporting period.
In addition, we always take into account:
- Long-term impact on the global or national economy for a period from 3-6 months to several years;
- Short-term impact on the market within a few hours (minutes).
«Rumors» and force majeure
Again, you need to define the term. "Rumor" is considered to be unverified information (including those listed above), as well as the hype before the release of statistics or any other event that causes a speculative price reaction on which the binary option strategy stops working.
Regularly in the media and the Internet, "rumors" are specifically thrown out on the market. So that this is repeated, commented on, analyzed, predicted, and then the big players "skimmed the cream" from the impending panic.
However, the classic “buy by rumor, sell by news” thesis doesn't work right now. Reliable information is quickly taken into account in real binary options signals (dissolving in the market), and speculators can only make money on provocations.
While small players lose money on "rumors"; professional players hedge their risks with other assets to compensate for possible losses when "real data" appears.
We should also highlight force majeure circumstances that cannot be predicted:
- Military conflicts: an aggressor country usually wins economically in the short term.
- Natural disasters: negatively affect the exchange rate of the national currency, the prices of raw materials and energy in the affected country or region.
- Change of political course: elections, crises, coups.
Important: in situations of force majeure, it is important to be sure that the binary trading platform technically correctly executes orders (without slippage, loss of quotes, weak liquidity), and it is possible to quickly close the transaction.
Where to get fundamental data
Basic (not all!!) news and statistics sources:
- Official statistics and data;
- Information from government and financial authorities, national banks, and industry organizations;
- Publications of information and analytical agencies, large economic publications;
- Statements and comments of officials, heads of financial institutions, analysts, politicians and businessmen;
- Reports and forecasts of the development of certain sectors of the economy, press releases;
- Expert reviews, financial and corporate reporting, analytics of leading companies.
- Technical analysis studies the “past” of the market, but the future is always determined by the economy, and not by indicators;
- When thinking about how signals work for binary option, always remember that fundamental information is always relative. It makes practical sense only if the country (region, company) of the selected asset operates in a market economy, there is no strict regulation of the economy, control and manipulation of data;
- The same indicators, statistics, events in different conditions exert different “pressure” on the market, this ambiguity complicates fundamental analysis;
- An understanding of inter-market relations and the ability to evaluate many factors comes only with experience. However, even with a successful binary option strategy, you can't ignore the impact of the foundation on the market. Otherwise, the market, in turn, will ignore you.