Market sentiment plays a huge role in how prices move, and will therefore impact each and every decision made when trading binary options. Market and investor sentiment are really one in the same, as it will be the attitude that investors have towards assets that determines whether or not they are being bought or sold. There is also a lack of sentiment to consider, as this leads to indifference and often flat market movement. Current and future sentiment will need to be taken into consideration when trading.
Price movement will tell you lots about sentiment. When prices are steadily climbing, the market is said to be bullish, which means that the asset is being bought more than sold. The opposite applies when more selling is taking place, causing the market to be bearish. It will be important to know why a larger volume or buying or selling is taking place, and in order to determine this, you’ll need to refer to market news and reports. These can be found online and should quickly point out the reasons behind the current price action.
There will need to be some consideration of the actual scale of various events. For example, a small change in unemployment numbers is not likely to make a big impact in the markets. However, a large change – positive or negative – likely will. Another consideration will be the time-frame of the impact. There will be data and events that sometimes cause a long-term trend in asset prices, while other information may only show as a minor blip in price charts. This determination will help with the selection of an appropriate expiry time.
There are markets as a whole to consider, but sentiment related to specific assets must be closely examined prior to trading with them. It is of course possible to trade on indices when trading binary options, but you’re likely to have access to a large number of currency pairs, stocks, and commodities as well. Any asset within these groups will be referred to as an underlying asset, and these will be what you’ll want to examine when searching for optimal investment opportunities.
Additional trade opportunities can come from realizing that some assets impact other assets. For example, should Apple release a smartphone that seems poised to dominate the market, Black Berry shares prices could fall if they have no product to compete with Apple’s newest release. Connections such as this are quite common, and it does not take long to realize exactly what these connections are. Once you become familiar with common pairs, it will become quite easy to know how one will influence the other when it comes to price movement.
The rise and fall of asset prices is always linked to market sentiment. Investors will always have a reason as to why they are buying or selling, and these reasons are typically linked to recognizable economic data and earnings reports. Weather and natural disasters can impact sentiment as well, but these unplanned events are not as common as scheduled market releases. To access the latest information related to such information, save a copy of an economic calendar. These are available for free online and can certainly help with daily trade planning.