Financial Statements

Financial Statements

Financial statements and valuations tend to refer to individual companies. This article however, will focus on trading binary options / opening trade positions based on companies listed on the stock market.

The stock of individual companies are represented as a financial instrument and listed on charts. When looking to trade from this, there are many things to consider besides technical analysis and the general economic calendar. I’ve comprised the following list to act as a guideline of things to watch out for:

    1. Firstly, you’ll want to research into whether or not a company is planning to pay any general dividends. This is extremely important as a dividend announcement has a clear date. Should investors buy into stock with the intention to find themselves on the dividend list when the date expires, then they will generally take the opportunity to get out and move to another stock with the same strategy. If the company isn’t quite liquid enough, then things have the tendency to can get a little messy just after the dividend date passes. As such, I recommend avoid trading around that date, or to have a bigger expiration date for you option (if relevant) so that you remain unaffected by any specific moves.
    2. It is common knowledge among traders that monetary policies and release dates for specific countries are presented to the public through the economic calendar. However, you may not be aware that the same is valid for trading individual stocks.For instance, the US dollar flows up or down according to the GDP (Gross Domestic Product). The same is valid for an individual stock, which may be influenced by quarterly earnings release dates.Yahoo Finance has a pretty impressive season timetable that may help traders keep up to date with this:

      Simply input the name of the company you are interested in trading into the search box provided, and the earnings date, dividend due date, together with any information regarding its general financial situation and what market analysts may be expecting, will show up.

      Now, if trading a binary option, the expiration date on this occasion can consider the general economic calendar. Any trade made or position opened, will now be based off of actual figures vs. projected values.

    3. Lastly, there are many specific types of indicators available for evaluating a company’s stock price, such as its balance sheet, income statement, or cash flow, etc. Yet the PER ( Price Earnings Ratio) is arguably the most important. Quite simply, it considers that the lower the ratio, the more attractive the stock price and vice versa. Risky relationships with company stocks can be avoided by applying the PER prior to making any trade decisions.

Trading a stock price is considered to be incredibly difficult without the correct use of economic indicators and analysis. Stock prices are often subject to inside, algorithmic and dividend-hunting trading, which are complex concepts to consider – especially for a trader who may be looking for a simple high or low decision. However, if a binary options trader were to approach their trade research with the same attention to detail that many forex traders feel is necessary for successful growth, then I can see no reason why a suitable strategy cannot be formulated to suit and support an advancing trader of any type.