CHAPTER 4

Tracking Economic Forces that Impact Markets

While finding the predominant sentiment for the markets is important for selecting the direction of trading in the coming week, basic fundamental economic forces also affect the movement of prices. These forces are often in the background and remain important to monitor. The objective of this chapter is to provide a basic understanding of the fundamental forces that a binary option trader should know and track.

The relationship between economic fundamental forces and markets is not linear. This means that tomorrow’s or next week’s price direction is not directly predictable based on today’s or yesterday’s price patterns. Rather, price action is more chemical in nature, similar to what chemists refer to as a reaction-diffusion event, where an acid is dropped into a base and then the reaction follows a non-linear path. The globalization of the world economy promotes, of course, a gliding effect, where a change in growth, inflation, or interest rates in one country, or market, triggers a reaction and glides or cascades across the world. The gliding medium is the World Wide Web. A trigger event could be an earthquake, a sell-off in metals, a remark b....