- Is it important to analyze the market for day traders?
- Should I bother with all of those bewildering terms?
- Can’t I randomly place trades with the wild prediction?
These are the most common issues that go into every trader’s mind. Make sense! Who wants to work hard to analyze the market and do all these staffs to make money with the random prediction?
Well, now let’s clarify one thing here. Dear reader, it is the key point that will differentiate you from a gambler. Market analysis is the 1st task of a trade before executing any trade. It will help him foresee his profit level vs risk level. Based on that, he will try to accelerate his output and decrease his overall risks.
He won’t go with a 50-50 chance of winning and losing like an Expert. Rather, he will try hard to place a trade where the risk-reward ratio is 80-20 or likewise. Now, let’s talk more about this issue to get an understandable conclusion to this debate.
- Importance Of Market Analysis For Day Traders
you’ll have an enormous risk of failure that is almost equal to your winning chance. On the other hand, if you follow the right ways in options trading, you’ll have over 100% winning chances. As for market analysis, we all know the technical and fundamental analysis. Now let’s see how this analysis is important for traders, whether he is a day trader or a scalp trader.
- Importance Of Technical Analysis:
Technical analysis is based on the study of supply and demand. With this analysis, you can recognize a situation in the market, which had repeatedly resulted in certain development of the exchange rate. We then constructed a strategy for the future timing of the purchase or sale in this historical development.
The analysis works with various types of graphs; the most widely used is the candlestick chart. We distinguish between two groups of methods of technical analysis, graphical and based on technical indicators.
Moreover, Binary options are time-bound and condition-based. So, probability calculations play an important part in valuing these options. This is what technical analysis all about. Here, the determining factors include:
- Market reactions before and after an important event.
- Volatility history
- The direction of the price move
When you can successfully analyze all these aspects of a specific asset market, the winning possibility of your prediction increases, and so is your profit level.
Technical analysis helps in tracking proper entry and exit points. Moreover, Pivot point analysis helps determine trends and directions for any given time frame.
- Importance Of Fundamental Analysis:
Fundamental analysis is the practice of researching the overall state of the economy, interest rates, production, earnings, and management. It is based on the study of factors external to the trading markets, which affect the supply and demand of a particular market.
Binary options traders help us to use & analyze the online market and sentiment to predict the future value of an asset. Fundamental analysis is a method of analyzing global business dynamics using a qualitative approach. It employs various sources and resources, and every binary options trader should understand how to use the data they’ve collected to produce useful information for their trades.
On the other hand, these types of traders are more likely to pay attention to high-affected reports. Since high-impact announcements have a greater impact on the global economy than low-impact news, this is the case.
However, depending on the prevailing economic factors, a low-impact news item can transition to high-impact news. Fundamental analysis looks at various variables to help binary options traders get a sense of market sentiment based on current events around the world.
The following are some of these elements:
- Consensus or the Expected Number is based on a poll of leading economists who will give an average figure to which they expect the news to confirm.
- Actual Number — This is the actual figure mentioned in the news release.
- Deviation — The disparity between the consensus figure and the actual figure.
When traders use the news to trade the assets, they look at these numbers. A binary options trader might look into the deviation to see if there are any market surprises.
In this case, the difference is significantly greater than the predicted value, either to the upside or to the downside. This provides a very strong and accurate tradable signal for traders.
Though options trading seems very easy and simple, it’s not the real case. Even here, put considerable effort to learn and make money. And you can reach your goal for sure when you follow the right ways of trading.
And market analysis is a part of this whole process. So, if you are a binary options trader, it would be wise to learn to do fruitful technical and fundamental analysis. Otherwise, you may have some wins here and there, but they won’t be constant.