The internet is brimming full with websites proposing a myriad variety of get rich quick schemes connected to trading through binary options. A great many of these are presented in the context of elaborate so-called strategies. This writer has spent a considerable amount of time studying many of the claims being made by such websites. I regard them as grossly exaggerated claims and lacking a great deal of credibility. In this article you shall find an introduction to the concept of schematic analysis as Stern Options understands it, and I feel sure the reader will not find wildly exaggerated claims here.
Fundamental and Technical Analysis
All practically applied investment strategies take their lead from two kinds of a-priori analysis of the markets. These are, (a) fundamental analysis, and (b) technical analysis.
Fundamental analysis is the study of financial, qualitative and quantitative factors affecting the intrinsic market value of any given asset, i.e., stocks, commodities and currencies. In the case of stocks for example, we study the relevant company’s financial statements to examine its economic performance in terms of revenues, profit ratios and potential for future growth and expansion.
The case for fundamental analysis of currencies values is similar to that for stocks. The difference being that in this case we are analyzing the economic performance of an entire country. Therefore we look at everything from the overall performance of the economy and industry conditions to the measures in force or that are planned to be applied by governments.
The case of commodities, fundamental analysis concentrates on the forces of supply and demand for commodities. This can be considered as a simple equation. However, market prices for commodities have a cyclical dimension related to seasonal factors such as harvest time and consumer behavior at different times of the year, and because success in binary options depends on our ability to predict the future price, therefore it will be obvious to the reader that fundamental analysis is indispensable for success and definitely so for longer term contracts.
Whereas fundamental analysis is concerned with studying a balance of things such as company earnings, expenses, capital assets and liabilities, technical analysis on the other hand studies statistics relating to actual market activity as the means to predicting the future for prices. Specifically, patterns and trends for past prices and trade volumes.
Fundamental analysis is the long-term view of things, studying data from a number of years. Technical analysis takes the short term view into account, concentrating on minutes, days, or weeks etcetera, and these are the kinds of timescales we are interested in for binary options.
Stern Options Trend Analysis
The Stern Options trading platform is designed to help you make the most accurate use of fundamental and technical analyses. Each asset amongst the hundreds of stocks, commodities, currencies and even indices available on the platform are shown with clearly distinguishable charts. If you are a beginner at binary options, you will see that there are several different types of analytical charts and graphs that you will have to read and understand. Don’t worry if you have little or no experience of analyzing and understanding charts, because Stern’s website contains a set of instructional videos to help you and to make it simple to practice. Stern Options platform shows charts in real-time on their website for each of the assets on the trading platform. So you don’t need to make them, they are all ready for you online. Let’s look at an example of this:
In this snap-shot from the Stern Options trading platform you can see the situation for the price of gold on two kinds of chart. The topmost shows the graph chart, and the bottommost shows the candlestick chart. The essential difference between candlestick-graph and line-graph charts is concerned with how they display opening and closing prices. Viewed side by side using the same underlying asset and time frame, as in the example shown above, it is obvious that the trends and reversals are much easier to spot on a candlestick chart than is the case for the traditional line-graph.
We have to interpret the shape of the lines on charts such as these in order to try and predict the future direction they might take (i.e., over a period of minutes; hours; days; months) before making binary options contracts. Trend lines show the shape of the sentiment in the market. If the trend is moving upwards, you instinctively ask, ‘How high can it go and for how long? If the trend is moving downwards, you ask, ‘How far down can it go down and for how long? In both cases you see a trend and you rely on other information to help you figure out whether the trend will change. Stern Options clients soon find this kind of analysis as simple and straight-forward to do, because the know-how and practical guidance for it is provided absolutely free on Stern’s website.
Being able to understand binary options charts, and do technical analysis of the patterns and trends they contain is essential for success in this enterprise. It also equips you with the ability to distinguish between the wildly exaggerated and the realistic claims of prophets in the market-place.