What is binary options analysis?
Simply put, it is the practice of analysing a trade before placing it. Prior to taking a trade in any market, it’s not only wise but necessary, to carry out some sort of analysis on the asset you wish to trade. Common sense indicates that this will increase your chances of a successful trade.
Without analysis, binary options trading would be pure guesswork, making it no different to playing slot machines or roulette. There is no place for guesswork or gambling in binary options trading – I suggest you leave that to the Vegas high rollers.
In saying this, you may find binary options trades referred to as “bets.” Here at The Binary Options Experts, we detest this terminology! Trading isn’t something to be taken lightly. If you decide that trading binary options is something you want to pursue, then take it seriously and learn to do it properly. Analysis is an integral piece of the learning process.
As you probably already know by now, binary options trading is about predicting the behaviour (or direction) of an asset. The assets that are traded in their respective markets are the same ones we will trade in binary options, so we need to know how to analyse them both technically and fundamentally.
The first step in performing analysis for a trade is to locate a chart for whichever asset you are looking to analyse. As most binary options brokers don’t offer decent charting tools, you’ll need to find charts – forex brokers are usually the best option for this.
In the financial markets, the fundamentals of an asset always supersede the technicals. So do fundamental analysis first. Have a look at what is going on in the world – are there things happening in Europe that could affect the currency? Check for announcements – is the US non-farm payroll due? Will the head of the Bank of Japan be speaking anytime? Are there rates cuts due?
As you can see in the image below, one day can have plenty of announcements affecting many different currencies.
Now look closely at your charts to see what the support and resistance levels are. Is there any confluence? Breakouts?
As you can see, binary options trading isn’t about trading on a hunch. You have to be able to practice the appropriate analysis of the asset you want to trade, look for confirmation on the charts – and only then should you follow your plan to execute the trade.