Market Analysis Methods

The study of the binary options market and the basics of the strategy and tactics is centered around the concept of an integrated analysis. The fundamentals of the analytical apparatus that are used by binary options broker of ALEFmarket company are a set of fundamental and technical analysis. This layered approach allows using the basic theoretical knowledge, interpreting effective strategies to fit our goals, and developing both our own strategies and an intuitive feel for any changes in the conditions of the market of binary options.

We provide full support and assistance to our traders, provide a personal manager, train and help you forward without the need to study the theoretical foundations in depth and to search for information. However, every trader who works with ALEFmarket company should understand the concept of the basic tools of the binary options market analysis. In this section, we will define the essence and the methods of analysis using a simple and accessible language.

Technical analysis and trends for the valuation of assets

The technical analysis of binary options is based on the basic conceptual theories, an analysis of the economic situation, and the tracing of the history of market quotations. For example, it is possible to build charts and to predict the development of any situation as long as only 2 indicators are considered: the volume of trading and the price dynamics. The use of the technical analysis creates a template that allows you to predict the change in the value of assets.
The technical analysis of binary options is based on three main pillars:

1. Price movement takes all the factors into account

Technical analysis does not take macroeconomic indicators and economic conditions into account; the calculation is made on the basis of the dynamics of asset prices. It is believed that this approach is too generalized and insufficiently detailed. However, our leading experts note that the asset price is in the technical analysis is a single universal indicator that already includes all the main and related factors that can influence the situation. Therefore, it makes no sense to lay everything on the shelves and to detail and delve into the nuances.

2. History repeats itself

In the course of analysis of trends with respect to assets, a clear pattern can be observed: the situation almost never extends completely beyond the scope of a template. The bulk of market participants always react the same way to certain conditions and changes in the situation. Therefore, it is possible to predict their behavior with a high probability upon an analysis of previous changes.

3. Prices move in a trend

Technical analysis is based on a certain trend of price changes. This item conceptually repeats the previous one. It is assumed that a certain trend is formed on the market and that this trend sets the direction of price changes.

The advantage of the technical analysis is that the trader does not need to look for some information all the time nor suspect the universal conspiracy and wait for a dirty trick. Everything is much simpler. To understand the situation on the market and to draw up a forecast, traders only need to evaluate the current conditions and compare them with similar situations that occurred earlier. Therefore, this method is perfectly suited both to experienced players and to new entrants, who are yet to acquire an intuitive understanding of the situation.

Fundamental analysis

Fundamental analysis is a more voluminous and complex analysis, which takes a number of individual factors and their combinations into account. These data are then used to generate the most accurate forecast for the underlying assets. Within the scope of the fundamental analysis, both internal and external economic factors and the political situation are taken into account when assessing the assets.
Initially, the fundamental analysis was used to predict stock prices but later became a universal tool for the evaluation of assets of any kind. The fundamental analysis can either use main factors only or consider any related factors. For example, it is possible to take the GDP, the stability of demand for basic commodities of the country, the changes in the external economic situation, unemployment, external debt, bank rates, profits and projected loss into account.

In fact, predicting a situation requires the compilation of the most accurate and real indicative plan based on qualitative and quantitative characteristics. Indicative plans can be short- or long-term. Binary options mainly use the forecast of short-term prospects. Long-term forecasts are easier because they are more susceptible to logical analysis. With respect to short-term forecasting, it is important to choose the indicators that can really affect the economy and the price of assets in options at the moment.

Basic indicators for the fundamental analysis:

1. The GDP (the gross domestic product): a common macroeconomic indicator of the market value of goods manufactured and services provided by the government during the reporting period (12 months). The GDP is the primary tool that is used to track the development or the regression of the economy. It is divided into real and nominal. The nominal GDP takes into account the real market price; therefore, it increases with inflation. The real GDP is calculated on the basis of the real output growth rather than the rise in prices due to unavoidable inflation. The GDP impacts all the processes and changes in the economic situation (for example, investment in housing construction and development of the tourism sector). Thus, this option is an important indicator for the analysis of the economic situation.
2. Leading indicators: a set of the most important economic indicators that predict, as accurately as possible, the stable growth of the economy, the recession, or the likelihood of steep turns (i.e., the presence of global turns).
3. The IFO index (the business climate or confidence index): monthly data developed and published by the German Institute for Economic Research. This index is calculated for Germany and for the entire European Union on the basis of a survey of managers of enterprises of all the industrial sectors (except for respondents from banks). It consists of 2 indicators: real-time data and forecast (evaluation of the expectations).
4. The Money Supply Index: the amount of currency in a specific country. This includes own funds and foreign investment issued by the banking system. The money supply has no clear single definition of the number of factors; therefore, it can include bank deposits, marketable securities, and bank coins.
5. The unemployment rate: a factor that affects the purchasing power and the inflation rate. For example, the increase in the unemployment rate leads to the inversed decrease in the purchasing power while the decrease in the unemployment rate results in the acceleration of inflation.
6. Nonfarm Payrolls: this indicator demonstrates the number of employees in the public sector and allows making a forecast about changes in the situation in the near future. It gives an indication of the average wage, the rising inflation, the increased employment, and the movement in the market.
7. Purchasing power: an indicator of correlation with incomes of the population. Increasing the purchasing power results in deflation while its decreases, in inflation. Purchasing power level analysis allows predicting the development of the economic situation: the growth or the decline in demand for basic industrial products and imports as well as real-estate property.
8. Inflation rate: an indicator that is also known as the consumer price index (CPI). This indicator allows assessing the consumer basket and is used to see inflation clearly. Based on these data, it is possible to calculate the volume of investment assets and the price dynamics (fall or rise) of the value of binary option assets.
9. Retail sales: a set of total retail revenue. This is another functioning indicator that characterizes current trends. It can be used to build fundamental analysis models.
10. Personal income of population: an indicator of the level of income of citizens of any country. This indicator impacts all the contributing factors: the purchasing power, the inflation rate, investments, the development of all the sectors of the economy, and, ultimately, the improvement of the well-being. That is, personal income of the population can be used to make forecasts about the progress or the regression of the economy.

Selection of a strategy for the analysis

While another man’s strategies may work for a while, they will still remain another man’s strategies. Therefore, it is necessary to build on the experience of others, to analyze their methodology and approach, and to develop own methods on the basis of these data. ALEFmarket company offers our assistance so that you don’ have to dive into the maze of cobwebs schemes, theories, and methods of analysis.

We will provide you with a personal account manager, who will work with you individually. You can use his or her experience and expertise, ask questions, learn and hone your skills in the field of binary options trading.

ALEFmarket company is a leading binary options broker that employs employs the best analysts. Start earning with us: we are ready to provide you with unlimited possibilities and real prospects!