In the world of binary options trading, we really don’t pay much attention to company comparisons, but that doesn’t mean that we should just keep ignoring this. Many traders steer clear of comparative trading because it seems a lot like pure fundamental analysis, which doesn’t have much importance when it comes to short term trades. However, although some fundamental skills are needed for this to benefit you, it goes beyond that into sentimental analysis and has a large amount of technical analysis that is required, too. More importantly, this is an untapped area of potential for many traders and spending time seeing how this in-depth type of analysis can help you understand price movement better is likely to lead to a higher profit rate.
It’s tempting to just get locked into the mindset that if we trade a company, we don’t need to look beyond the company when considering fundamental details. For example, let’s say that you place a heavy focus on Alphabet/Google. There is a lot to consider with this company as it is huge and has many different divisions. In addition to the technical analysis that you run on the company, you probably also look at financial sheets, analysis expectations and commentary, which hedge funds are buying or selling shares, and what the major announcements emerging from the company indicate. These are all helpful tools for gauging what is going to happen in the near future for stock pricing.
But you need to look beyond these things if you want to give yourself an accurate portrayal of the company’s potential. You need to look at the industry that it is within. In this case, that’s the technology sector. What is the sector as a whole doing? How is this likely to impact Alphabet? These are important questions, and if you are not asking them and getting an approximate answer to them, you are likely going to be behind the rest of the game when it comes to making profitable trades. In the binary options industry you have some wiggle room that traditional day traders do not have here, but it does lead to missed opportunities. And missed opportunities means less money in your wallet at the end of the day.
Comparing Alphabet to other companies within the sector is also important. Who does Alphabet compete with directly? When that competitor does well, does it hurt Alphabet? When Alphabet does well, does it hurt the competitor? What companies does Alphabet have a symbiotic relationship with, so that they feed off of each other’s successes? These are also big questions that need to be asked. Not only do they give you a more accurate assessment of what will happen with Alphabet’s stock price, but it can create new trade opportunities. For example, if you know that Google has put a new advertising program into effect and it is taking business away from Microsoft, then you can see that call options for Alphabet are the correct choice and put options for Microsoft could be a likely trade candidate.
This is just one example of how company comparisons can boost your trading and help you to increase your profit rate. The technology sector is heavily represented on most binary options broker platforms so it is an easy starting point if this is where you want to start, but this information can be used in many other ways. You can even extend it beyond the realm of binary options and into other marketplaces, if you wish. This will be a little bit different and a bit more difficult in some instances, but the basic premises will hold true.