Introduction to Fundamental Analysis for Binary Options
Fundamental analysis is based on the principle that assets are generally priced incorrectly and that markets are constantly attempting to correct them. These corrections are based on outside events affecting asset price and therefore traders will need to continually check news items, company announcements and various publications.
This type of analysis can be subjective, because the investor is forming a view based on the occurrence of certain outside events. A trader would need to study all levels of data, depending on the asset he is trading, from company level through to industry and markets, on to country wide and global level.
Many events are interrelated and can affect the price of different assets and even different asset classes. Each type of analysis will help a trader become more successful in his forecasts. However, it is important to note that a combination of technical and fundamental analysis offers the greatest chance of success.
Fundamental analysis assumes that the market is rational and that a security’s price will eventually reflect the true value of the investment. By contrast, technical analysis assumes that the marketplace will repeat past trends and that a security’s price will eventually move in the same way other investment prices have moved.
As such, both theories potentially turn a blind eye to important external data. A stock that announces big unanticipated news is unlikely to continue to complete a price pattern, or to move directly towards its underlying real value.
Some of these factors and variables are explained in the other articles of this section as follows.
More important information regarding this topic: