17 августа, 2021

Fundamental Analysis

Fundamental Analysis

Fundamental stock trading can be tied to either earnings releases or economic/monetary data that is released. Movements in the marketplace around earnings releases are generally quick as most of the time, there is a release that is greater or worse than expectations. Even if a release is in line on the top or bottom line, there are many factors that go into a release that can move the price of a stock. For this reason, both individual equities and equity indexes are instruments that provide binary options trading opportunities.

Investors can also trade binary stock options around economic data. Data released by governments reveal the state of an economy. In general, stocks perform well during times of economic prosperity and tend to decline in price during soft patches and recessions. Positive or better than expected economic data can drive the prices of stocks higher and make binary option calls favorable. On the other hand, worse than expected economic releases with drive binary put option performance.

Monetary policy will also create momentum for stocks and stock indexes. Interest rate increases are generally bearish for stocks as the future discounted value of the cash flows of a stock are reduced with higher interest rates. In addition to the actual decision, statements that follow also can move markets.

Technical Analysis

Technical analysis is the study of price action as many analysts believe that historical price action can give clues to the future direction of the markets. Markets create historical patterns which reflect the fear and greed in prices. Technical analysis is broad, as studies can range from momentum indicators to support and resistance. Patterns and stochastic as well as statistical indicators can be used to help analyze what the market is expressing.

Support and resistance are hallmarks of technical analysis as it conveys levels as to which consensus was reached for a period of time. Support is a level in which prices have not been able to fall through and demand for stocks is greater than supply. Resistance is a level in which prices have a hard time moving higher through and supply for a stock is greater than demand. Support and resistance can be measured with trend lines, congestion, moving averages or horizontal support. Resistance levels are generally measured in the same way. These tools can give broad assistance to a trader and make the difference when attempting to generate solid returns.

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