Methods of Analysis

Recognize signals

If you wisth to have long-term success for trading Binary Options you should not calculate on luck or only your instincts but at least use a strategy. Nearly all strategies are based on various analyzes which are used to recognize signals. Basically the analysis of Binary Options does not differ on those methods of analysis that are used e.g. in the field of equity research. The methods of analysis in the field of Binary Options can be initially divided into two groups, namely in the fundamental and the technical analysis.

Fundamental analysis has only little significance for trading Binary Options

If you want to analyze stocks the fundamental analysis is quite more important. In the analysis of Binary Options this method of analysis plays only a very minor role and is sometimes even irrelevant. This is relatively easy to explain because of the mostly very short maturities of the Options. Basically the fundamental analysis is geared towards medium and long term.  The most Binary Options expire within hours, days or weeks  so the fundamental analysis does not or hardly help to get signals.

Technical analysis - the basis for successful trading?

Due to the low significance of fundamental analysis technical analysis (chart analysis) has more fundamental importance. At the technical analysis you basically first look at how the rates of the Underlying have evolved in the past. These courses are entered into a coordinate system which is also called a chart. On one axis the courses are registered on the other axis a timeline. The experts try to find regularities of the historical price development which then should allow a prediction for the future price development to recognize signals.


The various methods of analysis in the field of technical analysis

There are essentially three different analytical methods that are used mainly in the field of technical analysis namely the method "Support/Resistance", the method "Momentum Trade" and the method "Trend Reversal".


The method "Support / Resistance" means working with the so-called support and resistance lines. In short the chartist looks at the prices of the underlying assets at which point in the past the price has not continued to fall (support) or has not risen (resistance).
Read more about Support and Resistance

In the second method of analysis the "Momentum Trade" it has to do with the strength of a price movement. For this purpose the change of a course can be measured in different ways within a variable period. The trade signals are derived whether the momentum is rising or falling.
Read more about the Momemtum

Linked to the method of momentum there is another method of analysis which is called "Trend Reversal". If the momentum and e.g. the price development of a share behaves contrary so the share price rises while the Momentum falls (or vice versa) it can be a sign of a Trend Reversal. A Trend Reversal is a clear trading signal.
Read more about the Trend Reversal