Using Economic Analysis To Trade Binary Options

Capital markets are generally driven by supply and demand for specific financial instruments.  There are many underlying factors that drive specific instruments such as stocks, commodity and currency rates.  One of the best ways for an investor to determine the future direction of certain financial instruments is to use economic analysis, to initiate and determine a trading position to and profit in Binary Options.

Economic Analysis:

Economic analysis is the process of analyzing new economic data to determine if new information is priced into a financial instrument.  Financial markets usually price in certain expectations of future economic information into a financial instrument and the release of new information will generally alter price action to incorporate the new information almost immediately.  Price action is generally volatile after an economic release which produces an opportunity to trade an instrument that takes advantage of short periods of volatility such as Binary Options – with customizable time frames to trade and profitability determined by the correct prediction in direction of a an asset price and trend .

A trader who uses economic data generally uses a top down approach and will look at economic data and determine if the new information will change global flows.  Better than expected economic news can pull security prices higher even if the current fundamentals of the company are relatively negative.  Using the non-farm payroll report as an example, if expectations amongst economist are for an increase in jobs of 100,000 and the release shows an increase of 300,000, there is the likelihood that equity markets will increase.  The concept that a rising tide lifts all boats is prevalent for top down traders.

Economic Trading

Trading that occurs on the heels of economic data releases can be systematic, to the extent that a trader places Binary Options trades if the data is either greater or worse than expected, but most would consider this type of trading discretionary, as estimates by economists are generally based on an average range of expectation.

Generally, when investors are surprised by some new economic news, the market reaction is immediate.  This type of quick change in the price of a security makes Binary Options a robust and effective investment vehicle to trade assets of all kinds.

Evaluating the price action of specific securities post certain economic events will provide and investor with specific economic releases that are pertinent to the future movements of financial securities.    While certain economic events will generate a volatile market reaction, others will create market noise. Economic analysis is different for each sovereign country.   Each market presents different pieces of information that will mean different things to the traders that follow that market.  An economic analyst can attempt to follow all global macroeconomic events, but they will likely be more successful by following certain countries and the monthly releases those countries report.  The best way to start to following economic events to find a reputable source of economic releases, and monitor a securities movements post those economic events. This method of trading using economic analysis becomes much easier, simpler, and less time consuming when applying it to Binary Options trading. It is also much more effective at harnessing the potential and effectiveness of volatility based on economic analysis when trading Binary Options - largely due to its nature of a profitable trade being reliant on the price of an asset changing in direction – making the probability of a winning trade almost guaranteed through volatility involved when applying correct economic analysis.

This Style of technical analysis and using proven strategical thinking to trade Binary Options,  are extremely beneficial to both novice and experienced traders, and are all available to users who open an account with Magnum Options and take advantage of their unique and free 1 on 1 trading education program with industry experts.

Magnum Options is a broker platform that seems to have mastered the brokering world of Binary Options. Established in early 2013, Magnum Options uses the latest technology for Binary Options traders. The broker is privately owned by investors with many years of experience in the online trading industry. The day to day management is handled by a team of experienced online trading professionals who have all been in the position of their users, and really understand the needs and priorities of both novice and experienced traders. These professionals have assembled an educational team like no other that really focus on informing and educating all traders interested in trading binary options. Because of their expertise in the financial trading industry, Magnum Options has a very unique and refreshing approach to education, teaching people not only how to trade using a binary options account, but also how to use binary options with other  trading methods to maximize profits.