In the binary options trading world, the market price is the value at which an asset is currently traded. Similarly, the target price in binary trading is the value of a commodity in the future.
In simple words, the target price is nothing but an estimated value of an asset or stock of the future. If the difference between market price and stock price increases, multiple investors will show interest in that asset.
However, a change in the value of the target price can also make you face huge losses.
Components of Target Price
To understand whether a commodity’s target price will work in your favor or make you lose money, you should understand its four components.
Earnings per share (EPS)
Check the quarterly earning forecast report of an asset or the company you are willing to invest in. This will help you understand whether the company is performing profitably or not.
ESP forecast assumption
Make sure that the report you are analyzing is credible. You can check the credibility by looking for detailed assumptions.
The target price of an asset also depends on its valuation multiples like price/sales, price/earnings, price/book.
Valuation multiples assumptions
You should always look for assumptions that justify valuation multiples. For this, you can compare the price trends, market, and economic expectations.
The target price of a stock or asset can easily help a trader to understand whether they should invest in that particular market or not. So, you should always look for the target price by considering all these four factors.
Read other important articles in the binary glossary.
(Risk warning: You capital can be at risk)