Before anyone enters the highly volatile world of binary options trading, there are a few things that should be taken into consideration. Among them is the need to educate yourself as to what causes movement in stock prices. A successful binary options trade experience hinges upon being able to aptly predict large swings in stock prices. Knowing the causes to look out for can help the new trader to anticipate these changes and manipulate their trades to take full advantage of the situation. With hundreds of stocks to choose from, it can be difficult to decide which options to utilize and which stocks to educate yourself about. Some of the factors to take into consideration are listed here.
- Know the financial status of the company: When considering whether or not to trade on a stock option, the more information you can learn about that company’s finances, the better your decision making will be. Know the history of the company you are considering. Earnings reports greatly affect stock prices. If a company shows a loss, that loss can be detrimental to the stock price, and the traders involved with the stocks can react accordingly. However, if a company posts a loss on their earnings report, but that loss is significantly less than the previous quarter’s loss that can be interpreted as good news and an improving situation. The same event can be interpreted in a completely different way if you know the history of the company and their earnings report.
- The state of the Government: The regulatory policies of the government that is involved with a particular company can have an immense impact on a company. When a new regime comes into power, the policies and rules that govern commerce can change overnight. It is imperative that an experienced trader keeps this in mind as they try to manipulate the situation to their advantage. Changes in government regulations can cost companies extreme amounts of money in order to comply, which can drop stock prices. By the same token, relaxing those requirements, or eliminating certain rules, can save a company an immense amount of money, which leads to the stock prices going up. Knowing the politics of the people that taking over, or the people that are leaving, can greatly assist the trader in their long term decision making.
- The public perception: Judging the perception of the general public towards a company and their stock is important as well. If there has been recent poor publicity regarding a company, that can affect stock prices in the short term. Things like labor practices that come into question, product malfunctions that lead to recalls or safety issues becoming public knowledge can all impact prices in a severe way. In addition to issues that are specific to the company, there is also the public opinion of the worldwide economy and the overall consumer confidence index to consider.
These areas are vitally important to the stock price stability of a given company. Staying abreast of these issues is a mandatory task for the experienced trader who wants to turn these topics into their distinct advantage when trading binary options.