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Learning from FANG’s Past

Although much movement is already behind them, the “FANG” stocks still have a lot of room for growth ahead of them. FANG is an acronym that accounts for four of the biggest tech stocks in the game right now: Facebook, Amazon, Netflix, and Google (Alphabet). These four stocks have made huge strides in the last couple years, and some of these gains have surprised even tech stock insiders. However, just because they have seen a lot of growth does not mean that their best is in the past.

Let’s look at the facts. In 2015, these four companies had a combined growth rate of 83 percent—a huge number by any measurement. After this, many critics assumed that the growth was too big, and that a correction was bound to happen. Despite this assumption, all four companies still grew at strong rates. Facebook increased by 10 percent, Amazon grew by 11 percent, Netflix saw an increase of 8 percent, and Alphabet moved upward by only 2 percent. With the S&P 500 increasing by just under 10 percent in 2015, both Facebook and Amazon outperformed, with Netflix being just below the breakeven point. Alphabet was a severe underperformer during this time period, but despite this, it still showed gains.

What does this mean for you as a trader?

This brief history lesson shows us that even furiously paced gains, like what was experienced in 2015 for these four companies, does not need to lead to losses. A strong business model can lead to consistent profits, even after the initial splash has been made in the marketplace. Netflix grew by over 140 percent in 2015, and was still able to keep pace with the market for most of 2016.

Paying attention to fundamental analysis is also a must for traders, especially binary options traders. When you are trading binaries, you can increase your rate of success by just a few percentage points, and that’s the best thing that a strong binary trader can do. Trading with the trend isn’t very exciting and it doesn’t have the same appeal that many other types of trading do because of the fact that there’s a lot of waiting for the right moment to enter a trade involved, but it does increase your correct trade rate, and over the course of a year, this equals thousands of extra dollars of earnings. We trade to make money, and when we have a clear sense of where an asset is headed—stock or something else—then we can gain a better framework in which to make trades. The FANG stocks have shown that they are able to move in a consistent direction, even after great success. This fundamental knowledge is an important part of setting up each short term trade you will make.

If you are trading contracts for difference, your strategy will be different, although not as different as you might think. If you had taken out a 12 month binary call option on Alphabet at the beginning of last year, you would have profited the full amount that you would have agreed upon, let’s say 75 percent. If you had done the same with Netflix at the beginning of 2015, you would have profited the same amount, even though the company outperformed the agreed upon rate! Here, a CFD would have been much better, especially if you had used leverage to multiply your positions. Instead of slow and steady and predictable, with CFDs, you want fast and furious movement. This means that binary options are best for clearly defined direction, where CFDs have more potential when movement is going at a faster than normal rate. Both have use to the short term trader.