I got here the 2nd part of the guidelines on how to combine the two forms of analysis when preparing for trading.
So without any further delay…
When trading binary option, fundamental analysis is more important for the weekly and monthly expirations (long-term expirations).
For example, if prices were hitting the lower channel line, you might avoid buying a call option if you knew that there was a strong fundamental factor driving the pair lower, so that support of the lower channel line might not hold.
For binary options with daily or hourly expirations, the fundamental analysis that matters most is news events occurring around the time of your holding period.
Beyond that, trading binary options with expirations of a day is mostly an exercise in technical analysis because fundamental factors (except for certain news events) don’t have time enough to influence prices.
Some additional warnings about fundamental analysis and the need to combine it with technical analysis include:
- Good fundamental analysis is time consuming and very often inaccurate, even if you have the requisite background.
Therefore, until you are experienced, find which analysts to follow on a regular basis.
- Timing the effects of fundamentals on currency prices is very difficult, and often impossible, due to the number of possible fundamental influences on forex prices.
For example, many top analysts were calling for a drop in Japanese stocks years before they began their 20-year (and counting) decline began around 1990.
Hope this helps when you make your next trading option decisions…