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Using Stock Fundamentals

Sometimes there are companies that just defy the traditional logic that we have come to expect from the stock market. This usually happens in revolutionary type companies, the ones that change the way we must think about their particular sector. Regardless of where you are trading–whether it be in the stock exchanges or in the binary options markets–you need to know how to spot such a game changer. It’s really not that hard to do because there are always a few of them out in the markets somewhere.

One of these extraordinary companies is Amazon. Not only are they a hugely popular stock right now, they are also one of the more widely traded binary assets, too. Stocks usually don’t receive a lot of attention from binary brokers, but Amazon is one that pretty much every broker carries. It is at a high price right now, but that doesn’t seem to bother many people. In the past five years, price has gone up by almost 600 percent, and it continues to outperform expectations. But why? It has a price to earnings (P/E) that is astronomical and in most situations would be deemed dangerous. That ratio is at about 500 right now, way above what is considered to be within a “safe” zone. If you are a fan of these indicators (and you should be), you should also consider where Apple was back in 2003. At that point, they had a P/E of 72–a number still considered to be way too high. But back then, Apple was at around $7 per share. This is right before they started on a rampage that took them up over $700. In other words, for some certain companies, the traditional methods of measuring them just don’t apply.

Look for a company that is doing something that no other company is doing, and is doing it really well. Sometimes it might take many years for this concept to take off, like with Apple. Other times, things will progress quickly. It doesn’t matter how long it takes because with binary options you don’t have to worry about timing as much as you do movement. When an asset is moving, you can make the same profit or more as you would if you waited for months in the stock market, sometimes. A big increase like what happened with Apple can be simulated with a few days of nicely timed 15 minute trades. You don’t have to wait ten years like traditional stock investors would have had to.
A Deeper Look at Apple
P/E can be a good indicator, but usually not for the big movers. If you’re looking at just the blue chip companies that continue to do the same things every year, price to earnings is a valid way of appraising where they are going. You want a company that is not overpriced, obviously, but you also want a company with a realistic chance of moving in the direction you want it to. P/E doesn’t give you a reliable, across the board, measure of this. The best way to approach a super popular asset is to examine it with more than one method of analysis. For example, look at fundamentals like P/E, but you also need to look at technical indicators that can give you a more mathematical approach, too. You also should be looking at external factors like the news and sentimental trading ideas. All of these are valid methods on their own, but as you saw with the two P/E examples above, they are not always effective alone. Find a few that work well in conjunction with each other for a few specific assets, and you will have much better results. And that means higher profits.
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