Analysis

  • 1. Fundamental Analysis

    The fundamental analysis includes the research of economic indicators, factors of social sphere and international government policies, the results of which enable traders to predict price changes and market directions.

    To predict future stock prices, the fundamental analysis includes the research of companies, industries and economies to define the current and future fair value of the given security. The theory of this type of analysis states that if the current price is above or below the fair market value, then the instrument is considered to be overvalued or undervalued, and experts believe that in the future the market will move in the direction of a fair price.

    Traders analyse the current level of the country’s economy by results of the investigations of macroeconomic indicators:

    • Interest rate level.
    • Indicators of economic growth (GDP, industrial production, etc.).
    • Consumer price index, expenditure indicators.
    • Inflation level and inflation expectations.
    • Indicators of employment level.
    • Retail trade turnover and consumer confidence level.
    • Trading balance, dependence on external sources of raw materials.
    • Financial and monetary policy of the government.

     Study of macroeconomic indicators

     Macroeconomic indicators are statistical data that reflects the actual state of the economic sector of the country and its every field, such as labour market, industry, services market, trade, etc. Reports on these indicators are regularly published in certain periods by government agencies and private research companies.

    Our financial analysts draft the economic calendar of decisive statements and events, which are used duly, can be a valuable source of information for binary options traders.

    Data of macroeconomic indicators enables traders to keep abreast of the country’s economy.

    But this does not mean that the market cannot change upon the publication of the data. There is a market volatility often after the publication of reports on the economic and political situation. The degree of volatility depends on the indicator value. That is why it is important for traders to understand the value of a given indicator, and how the specific indicator affects the economy as a whole.

      Interest rates

    Interest rates have the greatest impact on price changes on the foreign exchange market. Central banks that set interest rates are the most powerful figures in the process. Interest rates control the flow of investment. The difference between interest rates of various currencies affects the value of currencies relative to each other.

    Changes in bank interest rates lead to the movement and volatility of the Forex market. Under the conditions of the real movement of the binary options market, the accurate and timely identification of speculation of central banks significantly increases the traders’ chances of success.

    Gross domestic product (GDP)

    The GDP indicator shows the total value of domestically made goods and services for a given year. Since the data on the GDP indicator is published for the previous period, traders analyse preliminary reports, which are published a few months prior to the presentation of a formal annual report. These are the Advance Report and the Preliminary Report. Essential differences between these documents can lead to the volatility.

    Consumer price index (CPI)

    The CPI is a key indicator of inflation in the economy. This indicator reflects the relation of the value for the standard basket of goods and services with the price of the same basket in the previous period. Inflation is directly linked to the purchasing power of the currency and its position on the international market.

    When the economy is growing and the CPI indicator is increasing, it can boost the increase in the level of interest rates. This, in turn, increases the attractiveness of the currency.

     Employment indicators

    These indicators demonstrate the general situation of the economy and business. To understand the current state of the economy, it is necessary to know how many new jobs are created, what part of the population is employed, and what part of the population is unemployed. Another meaningful indicator is the change in the average wage and the rate of increase/decrease in the value of this indicator.

    Retail trade turnover

    The indicator of retail trade turnover demonstrates the total amount of revenue from the sale of goods by merchants to the population and small-scale wholesale sales to various organizations. The indicator of retail trade turnover is published monthly. This indicator is important for the Forex trader since it provides the information on the strength of consumer spending and the development level of retail outlets.

    By tracking the dynamics of indicators of retail trade turnover the trader may determine general trends and consumption patterns depending on the seasonal variations.

    The analysis of this indicator will allow one to predict other indicators, official reports on which are published on a quarterly basis or for the previous period. That’s how traders have the opportunity to determine the current direction in which the economy will develop.

     The balance of payments

    The balance of payment describes the relationship between the amounts of payments made by the country abroad over a certain period and received in the country during the same period. The figure shows the ratio between exports and imports, as well as all transfer payments. The positive balance contributes to the growth of the national currency.

    Fiscal and monetary policy

    The fiscal and monetary policy of the government addresses the issues of stabilization of the economic situation in the country. Regulation of taxes and expenditures, provision of credit supply and other financial instruments affect the management of interrelated macroeconomic factors.

    Analysis results:

    One can get a number of reports on the important macroeconomic indicators, with which it is possible to predict the trends of binary options. In the analysis of statistical data on the indicators mentioned above, it is important to understand their significance, but also the value and influence of one onto another. Then the trader can get a general picture of the current state of the economy and trade market.

  • 2. Technical analysis

    Technical analysis

    is the forecast of the price changes in the future, based on the analysis of the price changes in the past. It is based on the analysis of time series of prices and charts. In addition to price series, the technical analysis uses the information on trading volumes and other statistics. Most often, the technical analysis is used to review the prices that change freely.

    3 axioms of the technical analysis

    1. Movements in the market prices reflect all the information. All of the information affecting the price of goods is already included in the price itself and in the trading volume.
    2. Movements in prices depend on trends. The prices change according to the trends: time series of prices can be divided into intervals, which are dominated by price changes in certain directions.
    3. History of movements tends to repeat itself. It is reasonable to apply the models of price change developed on the basis of the analysis of historical data. Price changes reflect the strong psychology of the market crowd — the participants react in a similar way to similar situations.

     Advantages

     The technical analysis is simpler to use than the fundamental one. Two indicators of the technical analysis can provide the trader with the data that is necessary for the prognosis. Methods of the technical analysis are based on actions of the real market data and used in the real-time mode.

     Association for a more accurate result

     Traders are able to get the most complete and reliable information from the association methods of fundamental and technical analyses. Considering the influence of macroeconomic indicators and analysing the past price dynamics on the market, we can predict the future trends with high accuracy for the implementation of profitable deals.