Why is it important for binary options traders to follow the news?

The stock market does not exist in a vacuum. Between human events and nature, millions of independent factors collide, creating the world that the modern day market operates in. A well-informed binary options trader understands this, and tries to gain an advantage by identifying trends before they affect stock prices.

Here are a few of the ways that the news affects stock prices:

Wars

When fighting breaks out, the only winners are the munition factories of the victorious nation. For everyone else, the destruction of private property and the ending of lives serve only to hinder economic growth and reduce the free flow of trade across international borders.

For instance, last summer Arab terrorists triggered another war in Israel, after kidnapping some civilian teenagers and murdering them in cold blood. The conflict negatively affected Israeli tourism, and created financial pressures on the government.

Both of these combined will serve to hinder growth and lead to a weaker Israeli New Shekel, their currency.

Natural Disasters

Back in the fourth quarter of 2011, flooding destroyed the manufacturing capacity for the hard drive industry. The sudden drop in availability for hard drives, lead to higher prices for nearly, all advanced electronics.

With the holiday season around the corner, computer manufacturers were left with no alternative but to raise prices. This lowered their sales projections, and ultimately harmed their stock prices.

However, there was an opportunity here as well. Flash drive manufactures were not impacted by this. The industry was still in its infancy, and the added demand help spur increased production and research into manufacturing better and cheaper solid state drives.

Politics

There is an old saying comparing politicians and diapers. It exists because of the ability for elected officials to throw a monkey wrench into a smoothly functioning market. The most recent example of this may be viewed in Hong Kong.

The Chinese government is attempting to work around the democracy pledge of its reunification treaty with the former United Kingdom territory. This has led to mass protests of a scale unseen in the nation since 1989.

The political uncertainty has created pressure on the Hong Kong markets, lowering stock prices and projected growth rates. If the Chinese government reacts like most totalitarian nations do, the bloodshed will create a ripple effect lowering growth and creating chaos through the whole region.