Everyone who participates in market trading, binary options or otherwise, will need to complete the process of trade analysis. Market research should always be two-fold, including both a study of market news and reports, along with a study of price data. While price data is widely available and can easily be gathered, traders will need to know how to actually incorporate it into the analysis process.
Keep in mind that both types of analysis – technical and fundamental – should be carried out. Asset price data will provide a lot of information about price movement, but it should not be used as a stand-alone means of forecasting the upcoming direction of movement. Commit a small amount of time to reviewing market reports so as to learn now only how a price is moving, but why. Investor sentiment is what moves market prices and traders should remain mindful of this.
Price data can be studied for various periods of time. The time-frame being studied should be in some way linked to the expiry time that is being considered for selection. If you’re looking at taking a binary options trade with a 15-minute expiry, there would not be much point in studying price movement over a period of two weeks. This is not to say that the data period must exactly match the considered expiry time, but rather that one does need to link these two time-frames together within reason.
The analysis process should include the notation of the high, low, and average asset price for the time period being studied. Price charts do an excellent job of quickly displaying just how erratic or stable price movement has been for a period of time. Should a price trend be in place, this will also be clearly visible, as evidenced by a price line which is primarily moving upward or downward along with the actual change in value. More advanced charts will provide additional information, and indicators can be applied within these charts.
Time can be wasted by searching for trade opportunities within price charts before first checking out recent market news and an economic calendar. Having said that, there is no harm in quickly glancing at various charts to see if any trends stand out. Asset prices can cover quite a distance, even when market sentiment is not overly robust. When trading binary options, very little price movement is required in order for a trade to finish in the money, so price charts can be used to locate optimal trade setups at times.
Analysis tends to seem a complex process to new traders, but it will only be so when one tries to jump ahead of their skill level. There are plenty of basic price charts, and these should first be used by those who are new to binary options trading. A solid feel for how asset prices move can be derived from viewing these charts for a period of time. Price data should always be included in the analysis process, and the good news is that it is quite easy to determine what past movement means in relation to future movement.