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Real Life Affects Asset Prices

Political environments have a direct impact upon the financial markets. The effect can be more severe than others–depending upon the instance–but politics go hand in hand with the economy, and understanding this relationship can only lead you to making more money down the road.

Trading TimesLet’s look at a recent example so that we may see just how these two separate facets of life interact with each other. You’ve probably heard in the news about the Malaysian airline being gunned down over Ukraine. The threat of a war in this area has negatively influenced assets all throughout Europe. The European stock markets have dropped over the last week or so, and assets considered to be safer to Europeans have gotten stronger. Gold, the Japanese yen, and government bonds have all risen in popularity over this time. But because the Pro-Russian separatists have recently handed over the black box of the plane that was shot down–a signal of cooperation between different political beliefs in the area–the European stocks on Tuesday went up in rebound fashion.

Current events are such an important part of trading, yet they are often forgotten in all of the number crunching and chart gazing that has become so popular these days. Yes, the number analysis is important, but all of it means nothing if there are stronger pushes on the price of an asset coming from a source that the chart doesn’t mention. Current events are just one of the several influences on price that you need to account for.

And this, of course, begs the question: what do I do about this so I can still profit? The first is to pick an area of expertise. You cannot monitor all of the relevant news for the entire world. Focus on a couple assets that you enjoy trading and learn as much as you can about them. In this instance, perhaps you like to trade gold. The news here would have been difficult to use to your advantage unless you knew that gold is considered to be one of the biggest commodities that are invested in with regard to hedging. When an economy shows signs of trouble, gold is often the first place that money is moved to. So, with this in light, the fact that gold’s price per ounce went up actually makes a lot of sense.

Next, focus on a timeframe. Are you day trading? Position trading? There’s a big difference and what you choose decides how quickly you need to act. Position traders have a couple weeks at times that their trades will remain open, while day traders never leave positions open over night. If you’re day trading, you need info fast and you need to decipher it instantly. This type of trading lends itself nicely to binary options since they can last as little as 30 to 60 seconds, have low overhead fees for doing business, and the cost of entry is a minimum. Position traders might find worth in the more traditional markets, though, such as the stock market or the Forex market. What you choose depends on what your trading and how fast your trading it.

Your trading capital is a factor, too, although this will change over time as your money grows. For most, starting out small is best as they gain experience and learn more about what they’re doing, and this means binaries are probably best. In the example given here, using binaries would have allowed you to string together many different trades over many different assets–both upward and downward–all with the same broker and over the course of a single day. Using the news here could have led to significant short term profits.
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