At the beginning of every new year, analysts take time to reflect on where major economies are likely headed, and 2017 looks to be no different. Most major investment firms all agree that the major indices within the United States are all headed upward, although there is some variation in how much growth should be expected. Estimates for the end of 2017 in regards to the S&P 500’s final valuation range anywhere from 2,250 to 2,400. With a current price of just under 2,200 heading into the end of 2016, growth is definitely the consensus here. Just how much growth is likely seems to be the matter of the debate.
In order to estimate the amount of growth, analysts look at several different fundamental indicators and then extrapolate that onto the different companies that comprise this index, hoping to give themselves an accurate hypothesis of where prices are headed. Factors like inflation, the strength of the U.S. dollar, monetary policy created by the Federal Reserve, margins, corporate and treasury yields, and more are all looked at. As a short term trader, you probably do not have a lot of experience at evaluating these things. That’s not a problem, as long as you are able to look at what trusted experts say on these topics and can apply the information accurately to your trades. Most short term traders will never need to know how to come up with these numbers on their own, or even what they really mean for the economy as a whole.
However, this doesn’t mean that analysts do not have valuable information to pass onto traders, even ultra short term binary options traders. They often have a firm grasp on the general trends of assets. Binary options trades are more effective when done with the trend. And analysts often have the ability to predict (or even incite) the short term movement of assets. Again, this kind of knowledge gives traders a big edge when making decisions.
As a binary options trader, public perception is a key part of your success. Even if all of the analysts are way off in their predictions, which could occur if world or national events take an unexpected twist, knowing what the popular opinion of the general public is gives you a strong edge in short term trading. Even if public opinion is incorrect, it can sway prices one way or another. Traders have two major potential instances to profit off of this knowledge of market psychology. They can ride the waves that are created when prices move according to what the reactionary traders push forward, and they can also create trades that take advantage of the move back toward a more realistic and sustainable level. In this respect, paying attention to both public trading psychology and the fundamental realities of an asset can give you superior knowledge over other traders.
You will still need to look at the technical indicators that drive short term trade decisions. But when you add an extra level of decision making safeguards to your process, the inevitable outcome is your trades will be more accurate.
It also gives you an idea of how to make stronger position trades, or even find long term investment opportunities. This is outside the scope of our focus here, so we will not go into details on how to evaluate investment positions, but when a huge discrepancy is found between current price (as swayed by an incorrect public perception) and actual valued price, investment opportunities can become very profitable. Even as a short term trader, this knowledge can be helpful for boosting your end of the year bottom line.