Binary Options In the Context of Global Financial Crisis

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7 Binary Options

We have discussed Market Psychology more than once in our articles. When these forces are acting upon the market they can make it more volatile than usual. Reports such as the non-farm payroll often trigger unprecedented market activity as do other things such as economic news and natural disasters. Many traders prefer to stay away from trading when these types of events cause unusual selling and buying of assets in the market, but the truth is there is some profit to be made during these events and binary options trading is one of the best and safest ways to take advantage of them.

There are definitely some risks to trading on the market during times of crisis or economic uncertainty; it is a time if you are not careful you can definitely have some significant financial losses. You have to really ask yourself if it’s worth playing the market when there is news about European Union countries be nearly bankrupt, the American economy struggling to recover and disasters in Asia dictating market forces.

If you do play the market during these troubled times, then how do you profit from it? The only way you can make a profit at this time is by combining your market knowledge with a firm understanding of the market forces at work. When you trade binary options, it actually gives you a big advantage because it works when the market is rising in boom times and falling in times of financial collapse.

How is this all possible? When it comes to binary options trading you only have to correctly choose whether the market of a specific asset will rise or fall; binary options trading allows you to make a profit when asset prices move in either direction. If you can use your technical data and then adjust to the current market sympathy, then you could make a lot of money. Some estimate the return on investment during these times will be as much as 85%.

Let’s take a look at a recent natural disaster and see how it affected the market and subsequent trading. We have all heard about the devastating earthquake and subsequent Tsunami in Japan. It also greatly impacted a major nuclear power plant. If you had done your analysis right then it would have led you to believe that many of the largest companies in Japan, especially the owners of the nuclear power plant, would have seen a decrease in the value of their stock price. If you had placed trades based on this assumption you would have made a lot of money.

Here is an example. If during that crises you had placed binary options trades on the falling price of Mitsubishi and placed a $1000 worth of trades based on the above assumption, you would have ended up getting back $1750 on the trade.

I think that example clearly answers the question, “can you profit in times where the market is volatile”, with an emphatic yes.

Why Binary Options Traders Must Utilize Fundamental Analysis

S ince the emergence of binary options in the financial markets, this new market has largely been viewed as a speculative way of making money online. This is primarily because of the short-term nature of trading binary options as compared to traditional vanilla options. Binary options have expiry periods ranging from 60 seconds to about two weeks in most cases.

This is why most traders tend to focus more on technical analysis than fundamental analysis disregarding the fact that the price of the underlying asset could significantly be influenced by the fundamental outlook of the stock/asset in in question.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker 2020!
    Good Choice for Beginners!
    Free Trading Education, Free Demo Account!
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  • Binomo
    Binomo

    2nd in our ranking!

Ignoring the potential impact of fundamental analysis in binary options is a huge risk, and traders should actually embrace doing thorough analysis before placing their trades. Jason Collins, a senior analyst at OptionsClick, agrees that in order to succeed in binary options traders must utilize both technical and fundamental analysis.

In a recent conversation he said, “While binary options are typically a short-term method of making money online, traders cannot ignore the role played by the intrinsic aspects of the underlying assets, [which are long term in nature], because price movements of stocks and indices are generally determined by the activity of traditional investors (exchange based trading activity), and these investors base their decisions primarily on fundamental analysis.”

In general terms, fundamental analysis is a method of evaluating an asset based on both the intrinsic and external factors that are likely to affect its price over a given period. Such factors include macroeconomic events, interest rates, financial and political policies, and environment, among others. In valuing stocks, items such as price to earnings ratio, profitability margins, earnings events and management changes as well as insider/institutional investor transactions can affect the price of the underlying asset.

Fundamental analysis in binary options

Now, in binary options, traders have the opportunity to trade currencies, stocks, indices and commodities via the same platform.

However, as many traders will find out, there are not many analysis tools to use when analyzing stocks and other assets. As such, wise traders try to use the trading platform in conjunction with third-party analysis tools and platforms such as the MetaTrader 4 platform to analyze the price of the underlying asset.

However, for some assets such as stocks, the MT4 platform may not be the ideal tool to use especially when attempting to analyze the fundamental aspects of the stock. In this case, traders have to turn to websites/platforms that provide financial data about stock trading and general investing. Some of these platforms also provide timely updates on market moving events such as insider transactions and guru picks which can be very useful in helping traders to make smart investment decisions.

For instance, if an insider takes a huge position in Twitter ( NYSE:TWTR ), the shares of Twitter are likely to react accordingly. Knowing this in time could help traders make the right call. While long-term investors are more interested in following what Gurus (institutional investors and hedge fund managers) are adding to their holdings, traders would be interested in following their activity as timely as possible because for them, the important thing is to determine what direction the price of the stock could move in the coming trading sessions.

This is particularly important for binary options traders because with many binary options platforms, it is now possible to trade the shares of Apple ( NASDAQ:AAPL ), Google ( NASDAQ:GOOG ) and Barclays ( ERO ), among others. Therefore, if a trader wants to have the right picture before making a trade, then it would be right to also understand what positions major holders are taking in a particular stock. This provides a signal of what is likely to be the general direction of the stock (i.e., upward or downward) given the sentiments shown by major holders.

Most binary options are short term in nature, but some of the top binary options brokers have option types that take months to expire. Some even have end-of-year expiries, while others have six-month period expiries.

This means that fundamental analysis such as P/E ratios, P/S ratios and earnings growth can be applied in trading these types of binary options, and most importantly traders are able to apply more than just the technical view when making their decisions.

As such, traders can make more accurate decisions because in this case it is not just about interpreting technical data to predict the next move. Utilizing fundamental analysis in these types of binary options is likely to yield more than trying to use just technical analysis because a lot of events are bound to happen before the expiry period elapses.

With binary options, you only need to get the direction of the price correct to make a potential return of more than 80% among most brokerage platforms and thus getting your prediction correct is the difference between you making an 80% gain on your investment, or losing everything. Therefore, it is important to consider everything that could affect the price of the asset in question and that involves doing through fundamental analysis.

Conclusion

The bottom line is that fundamental analysis is the cornerstone of investing, and any type of investor including binary options investors and exchange-based traders rely on this type of analysis in making the right investment decisions.

Therefore, traders should not overlook this type of analysis even when trading short term instruments like binary options. This could be the difference between making money and losing all of it.

About GuruFocus: GuruFocus.com tracks the stocks picks and portfolio holdings of the world’s best investors. This value investing site offers stock screeners and valuation tools. And publishes daily articles tracking the latest moves of the world’s best investors. GuruFocus also provides promising stock ideas in 3 monthly newsletters sent to Premium Members .

This article first appeared on GuruFocus .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Binary Options Trading

Binary Options trading is the new kid on the block with the block being the world’s financial trading arenas. Binary Options give traders who do not consider themselves experts on the most complex financial instruments, or who do not have the means to invest thousands of dollars in their first trade, a feasible option. With Binary Options, you can benefit from significant profits, while taking advantage of both a minimal investment as well as instant gratification.

Because this industry is relatively new, we thought we would give you the information you need to get started making money with Binary Options. In addition to the information below, you can also peruse our binary options brokers reviews for the latest information about the best binary options brokers.

A Beginner’s Guide to Binary Options Trading

1. What is Binary Options trading?

Binary options trading is an up and coming financial trading method in which there are only two possible outcomes, hence the name Binary. The premise of Binary options trading is that you, the trader, guesses if the asset will increase or decrease in value by the time the position expires. If you were right, you take away the profit and if not, you lose your investment minus a small percentage that remains in your account.

2. What does it mean for the average trader?

This new trading method provides traders with instant results and gratification. Binary options trading is mostly conducted in a Web based environment so you can do it from any computer connected to the internet, PC or Mac. The trading is much simpler and more straight forward than any other kind of financial trading.

3. What are the benefits of Binary trader?

Some of the benefits of Binary options trading include instant results, simple trading, low risk, Web-based trading, game-like experience, and potential for huge profits.

4. What are the down sides?

The down sides of Binary options trading, like other markets, are that without sufficient preparation in the form of research, you can lose money. With the fun experience binary trading provides, many people trade it like it is a casino and that canbe dangerous.

5. What are the risks?

Contrary to other markets, the risks in Binary options trading are actually pretty low and completely depend on you. You know from the get-go exactly how much you want to invest and you cannot possibly lose more than that.

6. How do I know which broker to use?

Just like in other markets, you want to find a broker that is reliable, dependable, and offers superior service. The binary broker industry is in its infancy but there are enough choices out there. A few things to look out for in a binary broker include responsive customer support, a user friendly platform, flexibility in the trading assets, and an easy to navigate website.

7. Is binary trading complicated?

The major advantage of Binary options trading is its simplicity. You are either in the money or out of the money. If you think the asset will go up, you select the Up arrow in most binary platforms. If you think it will decrease, select the down option and set your price. You can then see what the asset is doing in real time and wait till the position expires. It does not get much simpler than that.

Learn Binary Options Trading

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How to Trade Hourly Forex Binary Options

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The Basic Terminology of Binary Options

Every financial market has its accompanying lingo. Words and phrases you will only see used in the context of that specific market. There are “Pips and Spreads” in Forex and there is “In the money” and “Out the money” in Binary Options. The following are some explanations about the primary terminology used to describe the Binary Options market. Read More.

Five Advantages of Binary Options Trading

The financial world is overflowing with markets. There are so many trading arenas a person can choose from, so how does one make that selection? The answer to that is of course a complicated one, just like everything else in the financial world. Read More.

Binary Options: The Fundamental Principles

Along with the world’s leading financial markets, such as the Stock Market, the FX market, the commodities market, and many more, comes a smaller scale trading arena with which most people are not familiar. Read More.

How to Choose Binary Option Trading Platform

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Binary Options in Today’s Recession

In today’s shaky economy, many people around the world have had the misfortune of losing their jobs. Others lost large sums of money in investments, and there are also the fortunate few who have not been impacted by the recession. Read More.

Can You Make Money with Online Binary Options Trading?

Online binary options trading is as simple as you can get and there is some serious money to be made. If you create an account with the average binary broker, chances are you will find a very simplistic Web based trading environment in which the most blatant two symbols are an up and a down arrow. Read More.

Forex Trading Courses

Want to get in-depth lessons and instructional videos from Forex trading experts? Register for free at FX Academy, the first online interactive trading academy that offers courses on Technical Analysis, Trading Basics, Risk Management and more prepared exclusively by professional Forex traders.

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Risk Disclaimer: DailyForex will not be held liable for any loss or damage resulting from reliance on the information contained within this website including market news, analysis, trading signals and Forex broker reviews. The data contained in this website is not necessarily real-time nor accurate, and analyses are the opinions of the author and do not represent the recommendations of DailyForex or its employees. Currency trading on margin involves high risk, and is not suitable for all investors. As a leveraged product losses are able to exceed initial deposits and capital is at risk. Before deciding to trade Forex or any other financial instrument you should carefully consider your investment objectives, level of experience, and risk appetite. We work hard to offer you valuable information about all of the brokers that we review. In order to provide you with this free service we receive advertising fees from brokers, including some of those listed within our rankings and on this page. While we do our utmost to ensure that all our data is up-to-date, we encourage you to verify our information with the broker directly.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker 2020!
    Good Choice for Beginners!
    Free Trading Education, Free Demo Account!
    Get a Sign-Up Bonus Now!

  • Binomo
    Binomo

    2nd in our ranking!

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