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Selecting company stocks as assets to trade binary options gives you plenty of opportunities because there are so many of them quoted on stock exchanges. And because some of those stock exchanges are located in different parts of the world, you can generally trade at most times because there’s usually at least one exchange open.
Even though there are plenty of company stocks to trade, it’s usually best to concentrate on a relatively small number or on particular market sectors. That’s because you need some knowledge of the stocks you’re going to trade to give you the best chance of doing this successfully.
You should maintain price charts on the stocks you want to trade so you can see how prices have moved in the past as a guide to future direction. It’s also a big advantage if you learn as much as you can about the companies you’re interested in. This means reading all news items and press releases about them, obtaining copies of their published accounts and looking at analysts’ reports and forecasts. What you’re trying to do is build up a picture so you can see where the company is going.
The company’s published accounts can be used to produce some useful figures such as earnings per share, divide yield and book value. By comparing these to figures for other companies in the same sector, you can get some idea of the company’s financial health and future prospects relative to those of other companies. This may give an indication of whether its shares are under- or over-valued so you know if they’re likely to increase or decrease in future.
Influences on share prices
News items and announcements can influence the price and they don’t necessarily have to relate directly to the company you are interested in. The launch of a ground-breaking new product or service by a company can cause that company’s share price to rise but, equally, can force down the share price of its rivals because they may lose market share. Buying a call option in the company’s shares and put options on those of its major competitors may result in winning trades on all of them.
As well as analyzing a particular company, you also need to be aware of what’s happening around it. A company’s shares will be influenced by its industry and the market sector it’s in. If the market sector is suffering, the company’s shares are likely to fall in value, or at least not rise as much as they might have done, even if the company itself is doing relatively well. Conversely, a company in a modern, leading edge industry is likely to get a boost to its share price even if it’s not the best company in the industry.
Companies don’t operate in isolation and are affected by the global economy as well as their country’s economic performance. That means their shares may fall in price even if their results are good simply because there’s general financial gloom around. You therefore need to take everything into consideration before trading company stocks.
When you want to trade, simply:
- access your trading account
- choose to trade stocks
- select the company you have been analyzing
- purchase a call option if you think the price will increase or a put option if it is due to go down
- enter the amount of your investment
- confirm the trade
- wait for the expiry time to see if your forecast is correct.
Continue to be alert to everything that’s happening so you always have the latest information. In this way, you will always be ready to trade when the opportunity arises.