Successful trading comes hand in hand with robust trading strategies and the ability to analyze the financial markets.  Analysis is the process of breaking a complex topic or substance into smaller parts to gain a better understanding of what an event means and how it will affect the capital markets. A trading strategy is a plan which maps out why a trader will take a position, when a trader will take a position, and for how long a trader will keep a position. To execute a trading plan, it is important for a trader to be able to analyze the different situations that affect the markets and be able to create a rational plan based on this analysis.

There are three major forms of analysis that are used to make trading decisions when trading Binary Options.

The first is Fundamental analysis.

Fundamental analysis is the ability to make trading decisions based on economic, financial or political issues, and analyze how the will affect the markets.  A fundamental event would be and economic event such as Gross Domestic Product or a company’s earnings release.

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The second type of analysis is Technical analysis.

Technical analysis is based on the premise the all the information available is already incorporated  in the price of a financial instrument.  Therefore, analyzing historical price action will give a trader insight into future movements in the market.

Many traders and analyst use fundamental and technical analysis in combination with one another.  Technical analysis is a broad term and can be used to create trading strategies, but also can be used to create entry and exit levels when trading the financial markets.  The combination of both fundamental and technical analysis creates a powerful tool that can be used to successfully trade the financial markets.

See :

  • Technical Analysis
    • Patterns
    • Dow Theory
    • Statistical Trading

See also :

  • Volume Indicators
  • Option Flow
  • Oscillators
  • Candle Sticks
  • What are Bollinger Bands ?

The third type of analysis used for making trading decisions is  Volatility Analysis

Whilst volatility may not be considered a major form of analysis for trading the stock market, when trading options and binary options it should be considered a major form of analyis.

See :

  • Volatility Analysis
    • Volatility Skew

See also:

  • Binary Option Pricing
  • VIX
  • Option Greeks
  • Binary Option benefits relative to Volatility
  • How to take advantage of a volatility smile