Binary options analysis
Binary options analysis refers to the process of analyzing the market or a specific binary option asset. The analysis is a required tool when trading binary options because with any additional analysis, the chance of successful trading is increased. The better analysis performed prior and during the trade, the more chances to profit from the trade.
There are two main approaches to the binary options analysis which are recognized and used by all professional traders. The first kind of analysis most people do without even knowing about it is the fundamental analysis. The second kind of analysis is the more technical one and is called technical analysis.
Fundamental analysis is the evaluation of an asset (such as a stock or a forex pair) using information sources that indicate the condition of the asset, the market, the competitive landscape and other factors that influence the asset and its rate. Fundamental analysis involves reading the relevant news about the asset, the different statements about the asset, and following what other traders think about the asset. All the research is conducted in order to gain the perspective of the history and the present of an asset in order to determine the future behavior of the asset. In the fundamental analysis there are two strategies to conduct the analysis; top-down analysis and bottom-up analysis.
- Top-down analysis starts by reviewing the global market and from the global perspective to isolate the opportunities in specific markets (region or industry) and to a specific asset which stands out from other assets in the market. After the isolation of the specific asset, the trader reads and learns all the different aspects of the asset in order to determine its future trends and rate changes.
- Bottom-up analysis is focused on a single asset that the trader chooses regardless of the region or industry. In most cases the bottom-up analysis is performed because the trader knows the asset or feels close to it.
- Technical analysis is the analysis of asset’s charts / graphs in order to isolate different patterns and different behaviors that may indicate the future rate changes in the asset (short term and long term. In technical analysis traders try to find patterns that are known to work in many cases or use different indicators and overlays on top of the chart to analyze different aspects in the chart’s behavior.