Sometimes the past plays very little bearing on what the future holds for a set of assets. In fact, sometimes an asset that flopped horribly can turn around shortly after and perform remarkably. This may sometimes require a long term approach, but even someone who trades short term binary options can benefit from this fact. The thing here is that it doesn’t matter which direction assets move since you can make a profit either way because of the zero cost difference in call and put options. Still, many people like to focus on the assets moving upward, even with binaries. If you fall into this category, just remember that you are limiting your money making opportunities. If you intend still pursuing this, though, just remember that there’s a lot more to what an asset does than what it’s past performance charts will tell you.
The opposite of this is also true--and this is something that is often forgotten. Just because something has done well historically does not mean that it will keep doing so. For example, a lot of people find big potential in the energy sector. Everyone needs to use energy in some way for powering their homes, driving their cars, and so on. It’s a commodity that’s not going away. In fact, crude oil is the world’s most widely traded commodity, ahead of even gold, silver, and coffee. Still, many people have held onto their energy sector assets longer than they should have. If you look back at April of last year, energy indices were way lower than they were by the end of the year. According to one index (the Energy Select Sector SPDR (XLE)), this sector gained about $14, based upon a sampling. But over the month of January, prices have generally gone down. Much of the gains that were created over those eight months was erased in 30 days.
The funny thing about this is that major energy stocks have followed almost in lockstep with this particular index. And while the XLE isn’t available for binary trading, big stocks like BP are. If you overlay a one year price chart of each asset on each other, you will feel like you’re just looking at one graph instead of two. The point is, that although past performance can reverse itself in the future to change an overall trend, there are usually signs that this is happening throughout the market. If you pay attention to more than one indicator, your chances of being unpleasantly surprised by a change in trend become much less severe. And fewer surprises means more profits for you.
It really doesn’t matter what you trade, either. Things like this are all over the market, you just have to be aware. There are way too many examples to list, but once you get a feel for your asset of choice and learn as much as you can about it, you will start coming up with proven examples that others have found. If you’re lucky, you might even stumble upon a few that no one else has made public yet. There’s really no substitute for experience in this industry, but it has to be smart experience. Blindly following trade after trade will make you money, but you will make even more once you become intuitive of market conditions and use a holistic approach to monitoring it. This sounds intimidating, but it’s not. It just means look at more than just one asset and look at those things in many different ways and from different viewpoints. You don’t need to know everything, nor should you try, but learn about your asset of choice and study intently upon the other things out in the markets that affect it.