Binary trading is a method which can bring you high earnings and lots of success. It can be a great additional source of income, or even become like a full-time job. However, if you want to achieve success, you need to take several steps and dedicate some time to each of them. One of the essential components of successful binary trading is analyzing the market and all its changes and movements. What can help you observe the market and make conclusions is the use of technical and fundamental analysis.
What are technical and fundamental analyses?
In brief, fundamental analysis studies the causes of the movements in the market, while technical analysis studies the direct effects of these changes. Fundamental analysis focuses on supply and demand of certain assets. It examines all the economic forces which may cause the changes in price, and tries to determine the real value of an asset. It is usually used to predict changes over longer periods of time.
Technical analysis, on the other hand, studies market movements alone. It does not take into consideration what caused the changes, but it observes them independently. Technical analysis tries to establish a pattern of price movements. One of the main principles of this analysis is that all movements in the market will repeat after a while and that they happen in cycles. It is more useful for short-term trades.
Which analysis is better for binary trading?
On the first sight, it is difficult to draw a clear line between these two approaches. Most binary traders are familiar at least with the basics of both analyses, and they use them for their trading. However, if we go more in depth, we will see that these two approaches are different. Furthermore, they are useful for different types of options and even different types of trading.
Fundamental analysis is suitable for stock market, and it is mainly used by stock traders and sometimes by binary traders who are focused on this group of assets. It is suitable for this kind of trading because it provides you with the “bigger picture” and makes a connection between cause and effect of the market changes. It is suitable for long-term trades, so it is generally not the best option for binary trading. Check out http://cybermentors.org.uk/ for more information.
Technical analysis is suitable for all types of binary options. It is not important which time frames you choose and which groups of assets you trade. It provides you with the real-time conditions in the market, which is useful for day trading such as binary options. Because of this, most binary traders opt for technical analysis and tend to master its principles.
What they both have in common is that they require a stabile and fast platform, like the one from Banc de Binary or other legal brokers. This way you can observe the changes in real time and draw correct conclusions. However, it is even more important for technical analysis, because it is used ore for short-term trades and you need to have the real-time data.