Binary Options Hustler 1

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Binary Options Hustler 1

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Copyright © 2012, 2013 & beyond by binaryoptionshustler.com All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law. Disclaimer & Terms U.S. Government Required Disclaimer - Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risks. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results. CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. Hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. All information on this website or any e-book purchased from this website is for educational purposes only and is not intended to provide financial advise. Any statements about profits or income, expressed or implied, does not represent a guarantee. Your actual trading may result in losses as no trading system is guaranteed. You accept full responsibilities for your actions, trades, profit or loss, and agree to hold Binary Options Hustler and any authorized distributors of this information harmless in any and all ways. The use of this system constitutes acceptance of our user agreement. Clickbank does not endorses this product. Clickbank reserves the right to change their terms at any moment without notice.

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Table of Contents

Part 1 - Setting the Stage 1 Introduction 2 Market Forecasting with Binary Options 3 Understanding the Fundamental Concepts 4 Starting with Realistic Expectations 5 Avoiding Newbie Mistakes Part 2 - Understanding the Options Environment 1 Binary Options Defined 2 Trading Terms 3 Expiry Times 4 Broker Flexibility 5 A Wide Variety of Option Expiry Times 6 Setting an Options Trade and Watching its Execution Part 3 - Contract Considerations 1 Setting an Options Trade and Watching its Execution

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2 Capitalizing on the Advantages of Binary Options 3 How Binary Options Contracts Work 4 Trading Fees and Commissions 5 Asset Choices in Binary Options 6 Improving Costs Part 4 - Contract Types and Risk Assessments 1 Additional Forms of Options Contracts 2 Optimizing Gains 3 American Style and European Style Options 4 Determining Option Values 5 Judging Risk Levels 6 Avoiding Binary Options Scams 7 Binary Options Trading Caters to a Wide Variety of Investors Part 5 - Fundamental Trade Analysis 1 Methods of Analysis 2 Fundamental Analysis Defined 3 Looking for Investment Opportunities in Over-Priced or Under-Priced Assets 4 Fundamental Analysis in Stocks 5 Fundamental Analysis of Commodities

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6 Fundamental Analysis of Currencies Part 6 - Technical Trade Analysis 1 Time Frames in Technical Analysis 2 Remembering Context 3 Common Tools for Chart Analysis 4 Support and Resistance 5 Examples of Support 6 Examples of Resistance 7 Trends 8 Uptrend Examples 9 Downtrend Examples Part 7 - Trade Execution 1 Putting it All Together 2 Trading with Support and Resistance 3 Trading with Trends 4 Trading with Fundamental Analysis 5 Moving on To Advanced Analysis

Part 1 - Setting the Stage Introduction

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Over the last decade the Internet has become a much more commonplace extension in the lives of everyday people, and this phenomenon has not been lost on the financial markets. Recent years have seen significant increases in the number of individual investors flowing into the online trading community and emerging trends in binary options are a clear example of this. Most of the allure come from the fact that trading in the financial markets can be an exciting and highly profitable experience, which has become accessible to anyone with a computer and a desire to learn the about the industry. While there are many available choices for people looking to get into trading in the financial (futures, bonds, or spot forex, for example), one of the easiest and most rewarding choices can be seen the binary options markets as the trading process in these instruments is easy to understand and does not take much work or research to get started. This does not mean, however that no research should be done before trades are placed with real money and here we will look at some of the essential market factors that should be understood before any of your hard-earned money is put at risk in an options trade.

Market Forecasting with Binary Options

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In its most basic sense, binary options trading requires to forecast the directional value of a specific asset. That is to say, investors must have some idea of whether prices will go up or down over a certain period of time. It really is that simple. But at the same time, market forecasts need to be conducted in order to ensure long term profitability and consistent trading results.

Understanding the Fundamental Concepts

In order to accomplish this, investors must have a firm understanding of the fundamental concepts that rule the financial world. This might seem like a monumental task but with a little time and effort, these factors can be deconstructed in a way that makes sense and when the strategies you have learned are applied on a consistent basis, long term profitability can be achieved. In this eBook, Binary Options for Beginners, we will walk you through the process of trade analysis and market forecasting so that you can have a firm foundation when you begin trading with binary options.

Starting with Realistic Expectations

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But before we begin, it is important to have a realistic set of expectations in place, so that potentially unfortunate surprises do not seem overly discouraging. With the advent of Internet trading, it has never been easier to place a binary options trade. But this does not mean that the process comes without risk. An analogy can be drawn to Texas Hold’em, which is a game that is easy learn but difficult to master. Trading with binary options is similar in many ways and can appeal to many people for the same reasons. Binary options are simple to trade. Anyone can enter into this business and make long term gains. But we must always remember that trading in the financial markets in not gambling, and that there is always the possibility to lose money if we are not well prepared and work to design a solid trading plan.

Avoiding Newbie Mistakes

Many newbies enter into financial markets trading without the necessary preparation, thinking that trades can be placed in the same way a lottery ticket can be bought and that wealth magically flow into their trading accounts. Unfortunately, this is not the reality. Anything worthwhile in life takes effort and some degree of hard work, and trading in the binary options markets is not exception.

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But with a little time and research, investors can implement the wellestablished strategies that have been time tested by seasoned traders in order to create reliable gains over the long term. The aim of this eBook is to help you understand these strategies, achieving long term success in the binary options world.

Part 2 - Understanding the Options Environment Binary Options Defined

No new investor should begin trading without a firm understanding of what a binary option is, and what it is not. In the financial markets, a Binary Options Hustler 9

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binary option is based on one of two outcomes - the price of an asset goes up, or it goes down. Before any trades are placed, investors must have some idea of what will be seen in the future value of an asset. Will the price of Gold go up or down? Will the S&P 500 increase or decrease in value. This logic applies to all types of assets (stocks, currencies, commodities, etc.). The central factor the investor must focus on is the future direction of an asset’s value. For this reason, there are no huge trades - and none that are “semiprofitable.” Trading in binary options is an all or nothing game. The profit and loss is set before the trade is executed, as both sides agree on the profit and loss parameters before the options contract is executed. Because of this simplicity, binary options trades provide investors with a form of trading that is highly accessible, given the straightforward trading structure. Trading with binary options differs from other types of investments in that the total monetary risks (and rewards) are clear upfront. Everything is dependant on whether or not your initial value forecast is correct. Values go up or down. You win the trade or you lose the trade.

Trading Terms

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Now that we understand the basic mechanics of the binary options trade, we should understand some of the common terminology that is used when people reference these topics. When entering into the binary options world, the first terms you are likely to hear are CALL and PUT. The easiest way to visualize what these terms mean is to imagine “calling in” an asset or “putting it away.” Buying a CALL options means that the investor expects the price of an asset to rise in the future. Buying a PUT option means that the investor believes the price of that asset will fall in the future. While there are some variations on these trading types (discussed in the accompanying Advanced eBook), these are the basic and most common terms you will hear when trading with binary options. Next we will look at the time periods for which these trades will be exercise, as this is the second most important aspect of the binary options trade. One critical aspect that differentiates options trading from more traditional investments is the fact that time periods are also established right from the beginning of the investment. If, for example, you choose to buy a stock, there is no requirement to sell that stock at any specific point in time. But this is not the case for options.

Expiry Times

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Most people outside of the financial trading community understand how traders can earn profits when buying a stock. The stock is bought at one price, that stock is held for an indeterminate amount of time and then the stock is sold back to the broker. If the stock rose in value during the holding period, the investor earns money. If the stock falls in value during this period, the investor loses money. But here, there is no person or regulatory body that demands the stock be sold back within a certain period of time. The actions of buying and selling the stock are determined only by the investor - with no requirements made in terms of holding periods. In binary options trading, this is not the case. The term “expiration” or expiry date in the binary options market refers to the period when a trade will reach completion. If I enter into a 1week options contract (either a CALL or a PUT), that options trade will end one week after it is opened. Whether or not my trade is profitable will depend on the accuracy of my original forecast and the directional movement of my asset’s value during the period I held the options trade. If I entered into a one-day CALL option in Gold, and the value of Gold was higher at the end of the day, I would profit on the trade.

Broker Flexibility

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But since all traders do not operate on the same scheduled, brokers have increased the flexibility of expiry times that can be attached to each options trade. For example, traders looking to be in and out of a position quickly can choose option times that range from 60 seconds to one day. Medium traders might select option times that range form one day to one week, while long term traders will likely choose expiration times that range from one week to one month.

A Wide Variety of Option Expiry Times

There is a wide variety of time frames that can be used for options trades. Shorter term time frames include 1-minute to 1-hour options, while longer term time frames can include options trades that are based on changes during a weekly or monthly period. Experienced traders approach short and long term time frames in different ways but what is important to remember at this stage is that each options contract will have a set period of time that is relevant to each position. Whether or not a trade is successful will depend on the price activity that is seen in the market during this period. As long as your primary direction is correct when prices reach the expiry date, you will earn money. This is true if prices have moved in your favor even if this is the case by only a fraction of one percent.

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Part 3 - Contract Considerations Setting an Options Trade and Watching its Execution

The first part of setting an options trade is selecting an asset. This might seem obvious and self-explanatory but traders with experience know that this is a process that requires care and attention. Selecting the wrong asset at the wrong time means that you will be in a trade that is not positioned to capitalize on the prevailing market trends. There will always be assets that have more significant moves in specific market environments and investors must understand how certain assets tend to perform on specific occasions. If you do not understand the forces that move individual asset classes, it will be very difficult (if not impossible) to successfully trade binary options on a consistent basis. Once you know the asset you want to trade and the expiry time you wish to select, the next step in the process in to determine how much capital you are looking to risk in your trade. Generally, traders will risk more money on trades that are more likely to result in a successful gain. That is to say, higher probability trades allow investors to risk more when compared to trades that are based on lower probability scenarios. But while determining your risk might seem difficult, the actuality is that the process is almost totally automated through your trading station. Binary Options Hustler 15

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Once you select your asset, expiry time and trade size, you will immediately see how much your trade can win or lose before you commit to the position. Next, you simply hit the “buy” button on your trading station and watch the trade until its expiration to see if the outcome is successful.

Capitalizing on the Advantages of Binary Options

Here, we can see one of the primary advantages of binary options trading: You will always know exactly how much money you stand to win or lose before the trade is placed. This is not the case in other forms of investment. If for example, you buy a stock, there is always the possibility that the company could go completely bankrupt and the entire value of your investment could be lost. With binary options, this is not possible. In the worst case scenario, prices will not move in the direction that was originally forecast but in these situations, all you will pay is the cost of the contract. How Binary Options Contracts Work Since binary options allow you to base trades in the direction of an asset’s price movement, there will be no differences on the degree to which prices move in your chosen direction. This essentially means that the trade will be a winner if it moves 1 point or 1,000 points in your chosen direction. You do not need trading forecasts that are massively accurate, Binary Options Hustler 16

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you simply need to choose the right direction. Your monetary gains will be the same regardless of the total magnitude of the individual move. To calculate your potential returns, you must look at the “return rate” in your trading station, which will often be expressed as a percentage. So, for example, if your return rate is 80%, you will pay $100 in order to receive a total return of $180 in your original trading forecasts are correct. In the alternative scenario (assuming your options direction forecast is incorrect) you loss for the trade will be $100. There are, however, many examples of options brokers that offer rebates on losing trades (which can be as high as 15-20%) and this can help to make a large difference in your trading account if markets turn in the wrong direction.

Trading Fees and Commissions

Another significant benefit of options trading can be seen in the fact that there are no additional fees or commissions that must be paid by investors in order to gain access to the markets. Also, there are no spread costs (which are typical in the forex trading markets) and this allows traders to help maximize profits over the long term. Since there are no hidden costs, traders will always know exactly what they stand to win or

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lose in each trade, allowing for heightened preparation before any money is put at risk. So, as we can see, binary options brokers have really simplified the entire process for traders, making things much easier for new traders or those that will be investing on an individual basis (without the help of large financial institutions). In addition to this, these brokers have been able to make substantial benefit offerings to their clients, which is a welcome addition to what is offered viewed to be a rigid industry.

Asset Choices in Binary Options

Now that we understand how binary options work, we will next look at the available asset choices that can be traded using binary options. This is important because nearly every type of asset can be traded in this realm. Common choices include stocks that are traded publicly. Examples can be seen in stocks like Apple, Facebook, IBM, or Microsoft but also in the broader indices that house these individual stocks. Examples in this case include assets like the S&P 500, the DAX in Germany, the FTSE 100 in England or the CAC index in France. But the world of binary options expands into other areas, as well, with commodities and currencies also showing in some of the most popular cases. Examples of commodities that can be traded include items like Binary Options Hustler 18

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Gold, Oil, Sugar, or Coffee, while examples of currencies include the Euro, US Dollar, British Pound, Japanese Yen, or Swiss Franc. Many brokers will also take suggestions for new assets to trade if your chosen product is not currently available.

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Part 4 - Contract Types and Risk Assessments But perhaps the primary benefit of trading these assets in the form of binary options is the fact that investors can gain exposure to the price moves without actually taking physical ownership of the asset. This can help trader to avoid storage fees and additional service charges. This makes it much cheaper to trade binary options (relative to other forms of investment), which, over the long term, will help to improve your profits.

Additional Forms of Options Contracts

In addition to CALLS and PUTS, there are other types of binary options contracts that allow investors to tailor their trades in a more flexible fashion. Some examples can be found below: ● The One Touch Option - The One Touch Option allows traders set a specific price level (for a stock, commodity, currency, or other asset)and receive a payout if that level is reached. ● The No-Touch Option - No Touch options allow the trader to profit if an asset’s price fails to reach a specific level before option expiry. In

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these cases, payouts tend to be smaller when the trigger price is farther away from the spot rate. ● The Double One Touch Option - Here, the trader sets two trigger prices and payouts will be given if one of these price levels is hit before the option expiry time. These options tend to work best in markets characterized by high volatility (many significant ups and downs in price activity). ● The Double No-Touch Option - The Double No-Touch Option is the opposite scenario, and payouts are given if neither price trigger is touched. These options tend to work best in markets with limited volatility (lacking significant price moves).

Optimizing Gains

Investors that are able to successfully trade the options markets will use the flexibility in contract types that is made available by brokers and use different types of binary options depending on the underlying conditions that are present in the market. These different option types will allow you to minimize risks and maximize gains, so in order to optimize your profit potential, it is very important to understand the price behavior that is likely to be seen in a given market and then to choose the binary options form that will best correspond to the market activity that is predicted. Binary Options Hustler 21

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American Style and European Style Options

Another way the financial community classifies binary options formats can be seen in European style or American style contract types. Binary options classified in the American style might be exercised at the exact moment a specific strike price is reached. Conversely, European style binary options can only be exercised once the contract expiration date is reached. In these cases, the current price of the security is looked at relative to the predetermined strike price, and this is how payouts will be determined. This can present some significant differences in specific trades as payouts will not be given if prices do not meet the correct criteria at the time of contract expiration. These is the case even if prices had actually met the predetermined criteria at some stage before the expiration date. For this reason, American style options will be viewed as preferable by investors seeking enhanced levels of flexibility in pricing requirements.

Determining Option Values

Before any trades are placed in these markets, investors should have some idea of how options are valued. These valuations include factors

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such as current market prices (of the underlying asset), market volatility, intrinsic value (the amount of money the option will be worth if immediately exercised and converted to the underlying asset), expiry time, interest rates and dividends (for certain asset types). Using these factors, there are several pricing models which can be used to determine fair values in the options markets. The most commonly used is the Black-Scholes model, which assumes that the price of an asset flows in relation to constant price variation seen in the market, the time value of money, the strike price of the option and the expiry time. Essentially, the main drivers in options pricing are seen in these economic factors. As asset prices rise, prices of CALL options tend to rise (while costs of PUT options fall). Conversely, when asset prices drop, the reverse scenario is seen in the pricing of CALL and PUT options.

Judging Risk Levels

As always, it is important to judge your risk levels when constructing any trade. Essentially, this requires an understanding of which market factors might cause your trade to unfold in an unfavorable direction. Certain macroeconomic factors might change and negative influence your original forecasts in ways that prevent your trade from paying out.

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Additionally, there are certain technical scenarios (such as a major run of stop losses or declines in market volumes) that can lead prices to perform in an erratic fashion. For these reasons, experienced traders tend to advise against trades that are placed during periods of increased uncertainty in the broader markets.

Avoiding Binary Options Scams

New traders should always be weary of advertised trading systems that promise a “quick path to riches” when trading binary options. Unfortunately, there are many examples of trading scams that prey upon the lack of experience that is seen with many new investors. Greed is a natural impulse in human nature and when trading systems offer the possibility of easy wealth (with little or no real work involved), it can be easy to believe the hype. But trading in the financial markets is really no different from any other business, and hard work and dedication are requirements for success. While this might seem daunting, there really should be some scope here for optimism because this should dispel some of the “mysticism” that surrounds the binary options (and most financial) markets. Binary Options Trading Caters to a Wide Variety of Investors

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An exciting aspect of binary options trading is that markets are now accessible to anyone with an active interest. In order to place trades, you do not need years of experience or connection with major market players in the industry. But at the same time, it should be understood that trading with binary options is not a get rich quick scheme, and some level of research must be conducted before trades are placed. Trades can be completed as quickly as 60 seconds after they are opened, and this can blind new investors into thinking that massive wealth can be achieved in very short periods of time. This, of course, is the wrong approach, as there are substantial risks involved when large positions are opened. The right mindset for binary options trades requires a willingness to develop a trading plan, daily trade analysis and market research. As long as you are willing to spend the time focusing on these areas, you will be able to achieve your goals and to trade these market successfully. In the following sections we will look at some of the specific areas of the financial markets that must be understood before real trades in binary options should be placed. These topics will include the various ways investors will analyze economic factors that are influencing the financial markets and the different strategies that are used to interpret chart graphs.

Part 5 - Fundamental Trade Analysis

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At this stage, you are probably asking yourself how analysts and investors make their forecasts and predictions for which direction a stock (or other asset) will likely travel in the future. Of course, this is one of the most critical aspects of any trade and without the ability to determine it these forms of analysis, it will be impossible to consistently trade in a successful manner over the longer term. So, when looking at the most commonplace forms of investment analysis, two clear categories come to the forefront: Fundamental Analysis and Technical Analysis. And while most investors tend to side with one strategy or another when conducting their own market research, there is still a significant percentage of the market community that draws from both methods when looking to construct profitable trading plans. In this section, we will first look to outline the important factors of the more traditional method of investment analysis, which would be seen in Fundamental Analysis.

Fundamental Analysis Defined

When looking at a history of investment strategies, fundamental analysis is often thought of as the cornerstone of investment strategy. In fact, many investors would argue that any trade that is not based on Binary Options Hustler 26

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fundamental analysis is not a real investment. But with such a broad topic, it can seem difficult to get a handle on what this form of analysis aims to achieve, exactly. Put simply, fundamental analysis is the study of underlying economic factors that will have an influence on the current value of an asset. To be sure, the process of fundamental can differ widely, depending on which asset class you are buying or selling at the moment. When dealing with stocks, a great deal of attention will be placed on a company’s balance sheet, growth prospects, earnings expectations, industry competition or upcoming product line. When dealing with commodities, investors will tend to focus on supply and demand issues that will influence the purchase price over a given period. For example, if oil production is expected to drop over the next month, investors will be looking to buy that commodity, as reduced supply levels tend to lead to greater prices. Other markets, such as the currency (forex) market, traders tend to focus on the macroeconomic data of a specific country. Key factors in these areas include Gross Domestic Product (GDP), inflation levels, interest rates, jobs creation, national retail sales and manufacturing productivity. In currency markets, investors deal with some of the broadest sets of data because prices will be determined by what happens on a national level - not by what happens in an individual company or in an individual commodity material. Binary Options Hustler 27

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Looking for Investment Opportunities in Over-Priced or Under-Priced Assets

Since fundamental analysis is an investment technique that looks to determine the appropriate value for a specific asset, the main task of a fundamental analyst is to accurately assess the economic well-being of a financial asset and then to relate that quality to the pricing levels that are currently seen in the market. When dealing with specific trades, investors will always want to find inconsistencies in market valuations. If something is trading in the markets at $1 when it should be trading at $2, a buying opportunity is present and investors should be considering call options. At the same time, when an asset is actively trading at $2 when a more appropriate value could logically be established at $1, a selling opportunity is in place. In these cases, a put option should be considered as the market has fallen too far in the wrong direction. Fundamental Analysis in Stocks

The first thing to remember when attempting to conduct fundamental analysis of an asset (in order to determine its appropriate value) is that not all assets are influenced by the same factors. Because of this, investors will need a firm understanding of the areas to watch depending on which Binary Options Hustler 28

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asset is being traded through binary options. In the following sections we will look at the various pieces of information that tend to be most important for fundamental analysis in stocks, commodities and in currencies trades. First, we look at the most common asset class: stock shares. Here, investors will be focusing on economics at the micro level, as the individual characteristics of a specific company will be the primary area of importance for options traders. Specifically, here is a list of factors that must be researched before stock options trades are placed:

● Review of the company’s balance sheet: Is the company saddled with excessive debt? Is there enough excess cash to keep the company expanding? Are profits being distributed in ways that will keep the company moving forward? ● Growth prospects: What are the company’s plans for expansion? Are these plans attainable? Will they help drive profits going forward? ● Earnings expectations: What does the market expect for future company profits? Price movements are often generated by positive or negative surprises in this area. ● Industry competition: Is the company a part of a heavily saturated industry? How does the company fare relative to its industry competitors? Which company in the industry has the most sustainable plans moving forward? Binary Options Hustler 29

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● Upcoming product releases: What does this company offer to the public? Are people interested in new product releases? How well known are these projects? Are product releases being properly advertised?

Fundamental Analysis of Commodities

In commodities markets, many of the above factors are largely irrelevant, because there is no single company that has a complete monopoly on any company. Because of this, investors tend to focus on different market aspects, such as supply and demand issues, as these will take on a high level of importance when markets are actively trading and determining fair market values. In many ways, fundamental analysis in the commodities markets is much simpler than what is seen in stocks, because what investors tend to watch are issues that are widely available but not specific to individual companies. For example, fundamental analysis of a commodity can be seen if oil production is expected to drop over the next month. In a case like this, investors will be looking to buy that commodity, because supply levels will be reduced. Reduced supply levels tend to lead to greater prices, as there is an equal number of people looking to buy a smaller number of available assets. This would be a positive scenario for a commodity (time to buy CALL options). Of course, increases in supply

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would lead to the reverse with prices likely to drop and investors looking to purchases new PUT options.

Fundamental Analysis of Currencies

When dealing with binary options in currencies, the playing field is once again altered. Here, traders tend to focus on the macroeconomic data of a specific country, so that its overall economic well-being can be determined. Key factors include data pieces such as the following: ● National GDP ● Annual inflation levels ● Outlook on interest rates ● Monthly jobs creation ● Retail sales activity ● Manufacturing productivity To be sure, fundamental analysis in the currency markets involves researching the broadest sets of data, which is determined by reports showing activity on a national level. While some suggest that it is difficult or impossible to accurately assess the economic health of an entire country, there is little doubt amongst experienced traders that these Binary Options Hustler 31

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markets tend to move (sometimes in a highly extreme fashion) when pieces of data, such as the ones listed above, are released to the public. Because of this, areas like annual GDP, inflation at the consumer level, interest rate and interest rate outlooks, jobs numbers, retail sales, and manufacturing productivity tend to be viewed as the cornerstone for the fundamental analysis of a country. This analysis is the first step in the process of assessing the appropriate value for the currency of that country, and many trades can be placed once this information in made public.

Technical Analysis

Technical Analysis is an area of the financial markets that has gained a great deal of popularity in recent years. In many cases, new investors are skeptical when they first hear about price chart, thinking that it is akin to something like “financial alchemy.” But the reality is that technical chart analysis is an integral part of trading in the financial markets and there is a substantial majority of successful binary options traders that use this type of analysis in some form or another. Here, we will look at some factors which explain what technical price analysis is, and what it is not. Only then will binary options traders be able to tame this markets approach and use it to achieve gains when real

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trades are placed. Below is a list of some of the central aspects of the discipline: ● Study of historical price activity (based on chart readings) ● Readings can vary widely depending on chosen time frame ● Identity of underlying asset is not taken into consideration ● Good for selecting trade direction and entry levels ● Many newcomers skeptical, but still widely used Now that we understand that, in essence, technical analysis is the study of historical price activity which is based on chart readings, we will have a look at some of these charts in order to get a more visual representation of the discipline.

Part 6 - Technical Trade Analysis Time Frames in Technical Analysis The first critical aspect of the discipline comes with the understanding that price activity is always viewed in terms of its temporal context, that is, Binary Options Hustler 33

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its time frame. Here, we will look at some different chart values (using similar assets) to see how price can behave in different ways, depending on this context. Here is a 5 minute chart, showing recent price changes in silver. The black bars in the chart indicate that prices moved downward during the 5 minute period while the white bars indicate that prices moved up during that specific 5 minute period.

What do you notice in the chart above? Are prices rising or falling during this period? It should be clear that prices are lower at the end of they chart than they were at the beginning, so, from this chart, we can see that prices are showing declines and downward momentum. But what does that really tell

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us about this asset? Should be buying CALLS or PUTS for silver based on this information? At first, we might think PUTS are a better choice, given that prices are declining. But first, let’s take a look at some other chart examples for the same asset. Below is a 1 hour chart in Silver:

What can we see looking at this chart? Prices end the period almost exactly where they began, giving us a much more uncertain picture. Let’s talk a look at an even longer time frame and try to get a sense of the bigger picture.

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Below is a weekly chart in Silver:

Now, of course, here we can see silver in a very different light, with prices increasing rapidly since the end of 2006 (seen at the beginning of the chart). But with all of this seemingly conflicting information, how could we possibly construct a trade?

Remembering Context

At this stage, we will hold off on specific trading plans. Here the main idea is simply to understand that context matters and that what might appear to be the reality from one perspective might change very quickly

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when looking at it from another. Another important point to remember when looking at these three chart examples is that the 5 minute chart only shows us silver prices over the previous half-day. The one hour chart shows us silver prices over roughly 3 weeks and the weekly chart shows us prices in silver over the previous 4 years. So, overall direction in these examples gives us three different scenarios even though we are dealing with the exact same asset. But while this might seem discouraging, factors like this will not prevent us from constructing high probability trades.

Common Tools for Chart Analysis

Next, we will look at some common terms and tools that are used by practitioners of technical analysis to get a better sense of the way price activity is commonly viewed. Here, we will define some of the foundational aspects of technical analysis so that we can explain how trades can be constructed in the final sections. The key terms we will be covering on the following sections include Support and Resistance, Up Trends, Down Trends - and all of these will prove vital for placing trade entries in the final sections.

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The first critical terms for understanding the basics of technical analysis are “Support” and “Resistance.” These terms are used by technical traders on a daily basis, so understanding what these mean will be vital for charting analysis.

Examples of Support

First, “support” is thought of as an area where buyers have previously stepped into the market in order to raise the value of an asset. The term applies to price activity in all types of assets (stocks, commodities, currencies, etc) and in the following charts we will look for examples of support for each of these categories.

Below are examples of support (shown in blue lines) in a chart showing the S&P 500:

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These blue lines show areas where buyers have helped propel market prices higher. Below is a similar example in the EUR/USD currency pair:

Finally, so that we can see that the term applies to all asset classes, we will see similar examples of support on the commodity of oil:

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Examples of Resistance

Conversely, “resistance” is thought of as an area where sellers have previously stepped into the market in order to decrease the value of an asset. The term also applies to price activity in all types of assets and in the following charts we will look for examples of resistance for each of these categories. Below are examples of resistance (again shown in blue lines) in a chart showing the S&P 500:

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These blue lines show areas where sellers have helped push down (or resist) market prices. Below is a similar example in the EUR/USD currency pair:

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Finally, an example of resistance areas shown in an oil chart:

As a final point, it should be remembered that support and resistance levels can be found on any time frame and for any type of asset. The main point you will need to remember is that there are previous pricing areas where buyers or sellers entered the market, which creates an increased possibility that prices will exhibit the same behavior (either rising or falling) if prices reaches those areas again in the future.

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Trends

Next, we will look at examples of trends. These come in three forms: upward, downward and sideways. When looking at trends, however, time frame tends to take on a greater level of importance, so in each asset example, we will look at trend activity from specific time perspectives and make note of those time intervals used.

Uptrend Examples

Typically, “uptrends” are defined as price activity that shows a series of higher price highs along with a series of higher price lows. In these cases, highs and lows can also be referred to as support (price lows) and

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resistance (price highs). Here is an example of an uptrend in the price of oil, with each price interval showing a span of 4 hours:

Next, we will show an example of an uptrend in the EUR/USD, also using a 4 hour chart:

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Finally, using a stock market example,we will look at an uptrend in the S&P 500, this time from a daily perspective:

So, when looking for uptrends, the main point to remember is that they can be seen on any time frame or in any asset class. The most important requirement is that higher highs in price are visible along with higher lows.

Downtrend Examples

Alternatively, “downtrends” are defined as price activity that shows a series of lower price highs (resistance) along with a series of lower price

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lows (support). Here is an example of an uptrend in the price of oil, shown on a daily chart (each price interval is equal to 1 day):

Next, an example of a downtrend in the USD/JPY currency pair, using a 4 hour time frame:

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Last, we see an example of a downtrend in stocks - with an hourly chart of the Nikkei 225 index:

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In each of these cases, traders should be looking to identify the general trajectory that prices are following. This will help us in the final sections when we are looking to turn the trading odds in our favor.

Trade Using the Broader Picture

These trend examples will show traders ways of determining the general direction for their trades. Are prices showing positive momentum or negative momentum? When we can see clearly highs and lower lows in prices, we will have a greater chance of implementing a successful trade if we follow the momentum that is already in place. Looking at trend requirements will give you key information as a binary options trader because you main job will be to determine whether prices will rise or fall in the future. Once you are able to look at these markets from a broader perspective, you will be able to make accurate price forecasts that reflect the way prices are likely to travel in the future. Since binary options trades are positive and negative in nature (upward or downward price movements), this is essentially all you will need in order to make informed trading decisions.

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Part 7 - Trade Execution In the final sections of this ebook, we will look to tie all of this information together and use everything we have learned to execute binary options trades in the market. At this stage, the most important thing to do is to take a step back and try to get a sense of the bigger picture. Think about what binary options traders are trying to determine when their analysis (be it technical or fundamental in nature) is conducted. Then think about the information (price charts and recent economic data) that is available to you as a trader. All of the information you will need to make profitable trades is contained right here. In the final sections, we will look at different aspects of trade analysis and then show chart examples of how this analysis would have unfolded in real time.

Trading with Support and Resistance

As we said previously, support and resistance levels are historical areas shown on a chart which represent times when investors have stepped in to either push down the price of an asset (resistance) or push up the price of the asset (support). This is no different from what a

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manager at a supermarket does when deciding whether to raise or lower prices of items in the store. If this store manager wants customers to buy apples, for example, he will set prices at a level that has attracted customers to this product in the past. In the same way, we expect prices in binary options to rise from these levels, based on this precedent and this would mean that options traders would look to establish CALL options when these support levels are seen. Below is an example of a CALL option trading set up in the S&P 500 using support levels:

In this case, we are looking at a 4 hour chart in the S&P 500. The first green arrow shows that prices have found willing buyers at the 1320 level in the past (creating our support level). Prices rallied here the first time, and as prices fall back to this level once again, technical traders will look to initiate CALL options given the probability that prices will move higher as Binary Options Hustler 51

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they did in the past. Since we are using a 4 hour price chart, we will move down one time level (to an hourly time frame) to initiate our trade. In essence, this means that we will be taking a 1 hour CALL option in the S&P 500 using a strike price of 1320. Let’s see how this trade unfolded:

With binary options in the S&P 500 typically paying out 80%, a $100 investment in this trade would have created gains of $80 in just one hour. Next, we will look at the reverse scenario, with trades using a resistance area as a basis for a PUT set up (given that we expect prices to fall after hitting resistance. This trading setup for PUT options in the EUR/USD currency pair uses resistance levels found in an hourly chart, with the focus placed on 1.3070:

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Trading with Trends

Trading with trends is a slightly different form of price analysis. Here, traders will be looking to determine where prices are likely to head in terms of direction (rather than a specific buy or sell level). As we said previously, uptrends are characterized by higher highs and higher lows in prices and in these cases, CALL options are much more likely to create profits because the underlying market direction is positive. Here is an example, shown in a 1 hour chart in Oil, where prices showed the requirements for an uptrend, giving us a signal to begin trading CALL options. In this case, we drop one level (from the 1 hour time frame to the 30 minute options contract) to initiate new positions:

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In this case, the higher highs and higher lows led an a 30 minute CALL in oil. Let’s see how prices unfold as time moves forward:

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In the example above, we were able to identify that the trends in oil were positive and likely to move higher in the future. This rationale was used as the basis for 30 minute CALL options, which unfolded in a favorable direction and created profits, in a short 30 minute span of time. In the next example, we will look at the reverse scenario, using a clearly defined downtrend in the Nikkei 225 stock index as a means for entering into PUT options. First, we must identify the trend itself:

With the stock index downtrend now clearly defined, we will look for entry levels for our PUT option. In this case, we will use the latest high, seen in the 8635 area on the chart, as an place to enter into out PUT option. In addition to this, we would have the benefit of entering into our

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PUT option at a higher level, increasing the probability that prices will fall in the future (prices cannot stay at elevated levels for very long). Here, we will be looking for the latest high in a downtrend to begin our PUT option in the Nikkei 225. We know that the overall momentum (downward) is on our side, and this helps to turn the odds in our favor for the trade. We are looking at a 1 hour chart, so we will drop down to a 30 minute options expiry in order to benefit from the larger momentum of the trend. Here is a visual representation of the trade entry:

Since we know that the odds are in favor for the trade (given the downside momentum and the excellent price entry), let’s now look at how price activity would have unfolded in the trade:

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As we can see, prices in the Nikkei 225 continued to move downward, which is not surprising given that the downtrend was so clear and that all of the market’s momentum favored our trade decision for a PUT option. When we are making trades in the binary options market, the primary goal is to look for clear trends in the market so that we can increase our odds for profitability once a trade is placed. From these examples, we can see that finding charts that show clear trends (either uptrends or downtrends) will give us a much better chance of determining how prices will move in the future. Once we have this directional forecast, we can then choose whether to enter into a CALL or PUT option for the asset we are trading.

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Trading with Fundamental Analysis

Finally, traders looking to implement a more real world approach in their trading can look to economic data releases and news headlines that will be relevant to the way specific assets perform.

If we remember from

previous examples, jobs creation can have a major influence on the prospects for a country’s currency or benchmark stock index. Positive numbers can be used as a basis for CALL options while PUT options will often be used after negative data is made public. Here, we will look at the ways monthly jobs data influenced the S&P 500 in the US:

The nation’s Unemployment Report was released early in the trading day on October 5, 2012. Overall, the report was a positive surprise, as the number of unemployed people dropped for the month. Let’s take a look at Binary Options Hustler 58

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how markets responded immediately after the data was released. Clearly, markets were encouraged by the data and buyers came flooding into the US Stock market. But how could binary options traders have profited from this information? Well, given the encouraging news (fewer people looking for work signals a stronger economy), traders could have entered into CALL options in the benchmark stock index in the US, the S&P 500. Since this information was new to the market, investors needed time to respond (buy stocks) and binary options traders could have capitalized on this time difference by taking CALL options on the expectation that prices would move higher throughout the day. When trading economic news releases 1 day options tend to be the most popular choice because the news sets the tone for the entire day. Here, traders watching this news release (jobs report) in advance would have known that stock markets were likely to move higher and CALL options would have been a high probability trade. Conversely, a negative economic report would have led to the reverse scenario, making PUT options the better choice. Note the example below, which shows the impact on the Australian Dollar (relative to the US Dollar) when national GDP figures were released and came in below analyst expectations:

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This example is significant for many reasons, as it shows that economic data reports will not only influence stock markets but currency markets as well. In early September 2012, Australia’s Gross Domestic Product (GDP) report showed that the country lost strength in productivity when compared to the previous year, and as a result, investors sold off the country’s currency (the Australian Dollar). In this case, binary options traders could have entered into PUT options on this currency, based on the expectation that markets would continue selling the Australian Dollar because of new evidence showing economic weakness. Finally, we will look at an example in commodities, as this asset class tends to trade off of data that is different from what tends to drive the stock markets and currency values. Previously, we mentioned that these markets tend to be influenced by supply and demand factors and one Binary Options Hustler 60

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example of this can be seen with the weekly inventories report for oil. This report shows the total levels of oil storage and production in the US (which is the world’s largest consumer of oil. So, in cases where inventory levels are shown to be high (increased supply) we would expect the value of oil to drop, creating the potential for new PUT options. Conversely, when inventory levels are shown to be low (declines in supply), we would expect the market value of oil to rise, creating the potential for new CALL options. Let’s look at a chart example in real time.

On September 19, 2012, weekly oil inventories showed a large increase in oil supplies. Increased supplies generally lead to lower prices, and the market reaction followed this negative trajectory once the information was made public. Binary options traders could have seized on this opportunity by entering into PUT options after the economic report was scheduled. Binary Options Hustler 61

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Moving on to Advanced Analysis

At this stage, traders will have a firm understanding of the fundamental aspects that go into creating high probability trading setups. Fortunately, there is not a single method that will be tied to all occasions. For traders who consider themselves to be more technical or mathematical in nature (perhaps, “left-brained”), we can use charting levels to identify how trades should be placed and when they should be initiated. At the base level, these forms of chart analysis rely on market terms such as “support,” “resistance,” and “trend.” These price elements can give traders critical information when looking to construct new trading ideas. Support levels allow traders to see when the market has stepped in to influence prices and push them higher. This situations create excellent opportunities to enter into new CALL options. Conversely, Resistance levels offer the opposite scenario. Here, traders are able to locate historical areas (using their charts) to determine when prices have failed in the past, and are likely to fail again in the future. This information can be critical for determining times to begin PUT options. Trends can also be used. If traders are able to locate price charts showing clearly defined higher highs and higher lows, an uptrend is in place (an excellent opportunity for CALL options). If lower highs and lower lows can be found, a downtrend is present and PUT options should be Binary Options Hustler 62

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taken. But even when traders find themselves reluctant to use price charts to construct trades, other opportunities can be found when major economic reports are released to the public. Here, fundamental strategies can be used to make price forecasts and create new trade ideas. All of this information can be applied to markets of all asset classes. So if you are interested in trading stocks, stock indices, commodities, currencies or any other trad-able asset, this logic can be used to make forecasts and construct binary options trades. In the Advanced section of this eBook, we will build off of these idea and learn to combine strategies in order to create opportunities for even higher probability trades.

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