Friday, June 8, 2012

Binary Options Analysis

Binary Options analysis provides a way for professional and novice investors to study market trends in order to make more accurate predictions on the direction of the price of the underlying stock. There are generally two ways to carry out analysis and they include fundamental analysis and technical analysis.

Fundamental Analysis
This generally has to do with the outside factors that are impacting the pricing of the underlying security. The market variables including commodities, stock, currency and indices are easily affected by various global events including natural calamities, management changes, politics, war, terrorism, foreign policy decisions and even small conflicts. These factors do influence the market momentum and every savvy investor must monitor them in order to make the right prediction on the direction of prices,
Then there is the option of technical analysis which relies on historical data in order to determine the future trends or behavior of a particular underlying security. As an investor, there are various technical binary options analysis tools that you can use to follow market trends and determine future pricing.

Technical Analysis
The simplest method to carry out technical binary options analysis is through the process of means revision. This process simply involves the mean in the price if the security and then using this to determine which direction the asset will move. Securities always gravitate towards a certain mean although they might have upward or downward movement.
There are more complex technical analysis methods such as the use of Moving Averages Convergence-Divergence or MACD. MACD analysis involves will generally give an indication of the momentum of an asset, telling you whether the asset is on an upward or downward momentum. MACD normally involves the plotting of the “MACD line” by employing a zero line, two moving averages and a histogram. The moving averages will involve the use of short term averages and long term averages. Where the short term averages are greater than the plotted long term averages, then the underlying security is said to be on an upward trend and can hence be purchased by the investor.  Investors use MACD analysis in analyzing various securities in the market and they are just as useful in binary options analysis. These technical analysis methods make use of the historical data of the underlying stock in order to determine trends. Following past price trends will help predict future trends enabling you to make more accurate price predictions.
Another binary options technical analysis method that can be employed by investors is pattern return technique. This is a complicated technique that involves investors working to establish patterns in particular underlying security. The patterns that have been determined will help investors in choosing the binary options that represent assets on an upward trend.

Charts provide an effective way in binary options analysis by helping investors in choosing the best options to invest in based on the visual representation on historical performance of the price of the underlying asset. There several charts that an investor can use to evaluate the momentum or trend of an asset including bar charts, line charts and candle charts.
Bar Charts
Bar charts are technical analysis tools used by many financial analysts to represent the daily performance of a particular security. The bar charts are simply a vertical line that will represent the lowest price of the day, opening price, closing price and the highest price of the day. They are useful technical tools for binary options analysis and are used by many investors.

Line charts
The line charts make use of data points that are plotted from the movement of the pricing of the underlying security at certain points with of the points connected by a line graph.  For beginners in binary options analysis, line charts provide some of the simplest modes for the representation of trends and can help in making decisions fairly fast. However, because they are plotted over discrete points, line charts may not be reliable especially in situations where you are involved in hourly options trading.

Candle charts
A candlestick chart refers to a chart that is used in investments to represent price movement in particular day based on the emotions of the market. It is a technique that was invented in the 1700s by a Japanese trader and is widely used in trading futures. It involves representation of the lowest price of the day, open or closing price, and the body whose color can vary from red to black based on how the stock market closes.

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