Besides technical analysis, fundamental analysis is also considered to be very significant in binary options trading. It works on principle that it evaluates all important factors that can influence the price, both internal and external. Those factors include data, ranging from company information to the big global market events. Some events affect asset price more intensely than with some other underlying assets.
For traders it can be difficult to monitor and follow all the time all relevant market news in real time. It is just too much information. However, it is recommended for traders to choose an asset and focus on one and use specific trading strategies to achieve success while trading binary options. Further in this article, traders from South Africa can read more on what type of events on the financial market, can fundamental analysis be applied.
Fundamental analysis based on natural events
A lot of underlying assets, such as corn, wheat, soya, oil etc can be at large extent exposed to market changes, influenced by different natural events, such as floods, earthquakes, hurricanes and other disasters. So in case of a flood, there will ocurre issue with wheat, let’s say. It will result with supply shortage and therefore, price of wheat will be higher than before the flood. It is pure supply and demand. Some natural events is easier to predict while other are more difficult which can finally result with a big market trends and instability of a particular asset. Back in 2001, when huge flood happened in Thailand, Japanese Yen was extremely hit with this disaster and Japan was not able to export goods to Thailand. This is an example of how natural disasters can have a large impact on a wide range of assets and change current trend without having time to prepare yourself for the upcoming events.
Fundamental analysis based on political situation
When you participate on financial market, political events can largely influence on price direction of particular asset. These political events can include war or sudden change that happened. For example, oil is affected due to tensions in Iran and that situation has increased volatility of oil commodity on the market nowadays. Changes in governments of some countries can also influence in price movement of certain asset; stock, currency, commodity or index. All these elements have to be taken in consideration before placing a trade because market situation can happen in any moment and traders should be aware of that fact. This is why advise our readers to read market news and try to predict will a particular asset be more or less affected on financial market.
Fundamental analysis based on economic data
Besides natural and economic events, release of different economic data can also influence on price movement of particular underlying asset. Different data, released from companies and governments have a wide range of importance levels for traders in binary options industry. In situation like this, traders in South Africa mostly use economic calendar to keep on track all relevant economic and financial data, that are being used in the trading process. A good quality economic calendar will provide traders a complete review of economic data release. Most significant data include GDP, unemployment and interest rate.
GDP stands for Gross Domestic Product and it is known as key indicator of economic health. GDP measures a total value of goods and services on a national level.
This is an amount, which banks pay to people, businesses or other organizations for keeping the money in the bank. Interest rates are used by central banks in order to change economic situation. As a rule applied, higher rates mean higher currency level as a rise in that country’s rate makes is more appealing and worthwhile for foreign investors to hold on a particular currency.
As on of the key indicators of fundamental analysis in binary options trading, unemployment can show exactly how good or bad and economy can be. It only requires to monitor unemployment rates to get the bigger picture of a particular economy. For example, economies who have low unemployment rate are doing very well, but their companies can face with a crisis and stop hiring people. This is seen as bad sign for this one economy. Once again, economic calendar can be of great help and will provide you the latest information on important market events. This is especially useful for traders beginners who can use economic calendar to turn their trading process in a profitable binary options trading that can assist traders to maximize profit when trading binary options. Fundamental analysis can be of great assistance during trading process.