When trading binary options your only job is to predict the movement in prices of underlying assets. The key to being a successful trader is making correct predictions. However, I'm not a psychic and I'm pretty sure you're not either. If we're given two options and we just choose from thin air, we'll most likely be right 50% of the time, and wrong 50% of the time. Since trading binary options requires your predictions to be correct at least 55% of the time to break even (based on the average trade terms), taking a 50/50 chance will most likely lead to losses. That's why we've got market indicators. So today we'll talk about what market indicators are and which ones you should follow closely.
What Is A Market Indicator?
A market indicator is any piece of data that could be used to make your predictions of what's going to happen in the market more accurate. For instance, my favorite market indicators to watch is the news. By following news trends surrounding traded assets, it becomes easier to predict if the value of that asset is going to go up or down. We'll talk about how to use news trends in more detail below!
My Top 3 Favorite Market Indicators
#1: The News - The news is my absolute favorite market indicator to watch. I probably spend more time on CNN Money than I do working. Why? Because the major news outlets will let me know when a company like Amazon produces a new product like the 3-D Fire cell phone. Based on this news, I can bet that the value of Amazon will go up throughout the day, and you know what? In most cases, I'll be right. The news also lets me know when a company makes a mistake. For instance, directly after releasing the 3-D Fire cell phone, Jeff Bezos announced that the company would be spending so much through the quarter that it would take a loss anyway. In this case, we can be the price of Amazon is going to go down...as it did! So, if you're going to be a binary options trader, and you're not too into watching or reading the news, you may want to reconsider your favorite forms of entertainment.
#2: Economic Trends - In the binary options arena, one of the most common asset types to be traded is currency. That's right, when you hear Forex, you're talking binary options! Anyway, if you want a heads up on what's going to happen with a currency, it's a good idea to watch economic trends. For instance, a report by the ZEW Center for European Economic Research recently showed that investor and analyst sentiment with regard to Germany fell more than expected. As a matter of fact, this is the 7th month in a row we've seen drops! As a result, we can bet that when compared to the US Dollar, we're most likely going to continue to see the Euro value fall. You can also find economic data by following economic calendars provided by brokers. One of my favorite economic calendars is offered by MXT Global.
#3: Retail Sales - Another great indication of what's going to happen with a specific asset is sales reports. When a company produces positive sales reports, we can bet that the value of the asset will raise. On the other hand, if a company produces poor sales reports, we can bet that the value of the asset will fall. Although sales reports only come out once per quarter in most cases, they're well worth looking into!
As I mentioned above, when you trade binary options, you don't want to leave the outcome up to chance. Doing so can only lead to losses! However, it is possible to be successful in binary options as long as you put forth the effort to do your research before making trades. Following leading market indicators is a great way to make sure that you end up in the money in more than 55% of your trades!