How to develop a winning trading strategy on IQOption.
Please note: As required by the European Securities and Markets Authority (ESMA), binary and digital options trading is only available to clients qualified as professional clients.
How to build a trading strategy? Examples, videos, tips, the most popular and easy to follow trading patterns. Comprehensive guide.
Trading: the action of buying and selling financial positions like Forex spots is only a small part of what it takes to become a successful trader. Anyone can register with a broker, open an account, invest money and trade. Successful traders follow a different path, a path where the operation is the last step in a series of actions. This post delineates, by passage, the anatomy of a winning strategy.
The fundamental analysis elements.
Many Forex people are purely technical traders, but the fundamentals are extremely important. When you look at the price action chart, that action is driven by the underlying fundamental conditions of the market. It is obvious that having a rough idea of these market conditions can only make it easier to read the charts. If you do not follow the economic news on a regular basis, you should do it. Economic news are a rich source of trading opportunities and the beginning of every successful trading transaction.
Source: IQ Option.
The technical elements.
The technical elements are the indicators, the lines of the trend, the graphs, the support and the resistance lines, the action of the price. The crucial is the skill of how to read each of these elements. The most commonly accepted technical signals are quite precise. Why does it work? Because these technical signals are generally accepted. Many people follow them and trading signals become a kind of self-fulfilling prediction. The graphs shows a pattern and people realize what to expect to happen. Learn what the technical elements are, apply them to the fundamental analysis. You will begin to recognize the most profitable entry and exit points.
Trading Strategy.
The strategy is extremely important because it offers a guideline for success. A strategy is a systematic approach put in place to solve a problem. The dictionary defines “strategy” as “a plan of action designed to achieve an overall goal”. The overall goal is to earn money thanks to Forex; the strategy is the plan to achieve it.
If things do not go according to plan you will have to go backwards, identify which part of the plan did not work. Fix it, test it and put it back into action.
A good strategy includes both fundamental elements and technical elements. It should also have specific rules on when to open and close a transaction.
For example, some traders start with the following assumption: in an upward trend, they only enter the stochastic upside crossover when the price is rebounding from a moving average. Take the following graph for example:
Source: IQ Option.
Risk management.
Successful traders always know exactly when they will go to the next transaction, without asking any questions. This happens because they use some forms of risk management. This approach does not allow them to invest excessive amounts in a single operation, or in a series of losing operations, and therefore to erode their capital. The most important lesson is to preserve and save capital.
Some traders use the percentage rule. This means that they risk only a fixed and predetermined percentage of their balance in each transaction. The amount of money that is invested in each winning transaction will increase as the balance grows, but it will never be too much in case of the losing transaction.
Open the transaction.
This part is the simplest if all the conditions mentioned above are respected. If you have a solid foundation, you will use it to perform a good analysis. Then you will wait patiently for the right signs of entry and invest appropriate amounts. Neither too much nor too little. At this point you will have to enter your order, execute it and observe what happens.
Source: IQ Option.
To monitor the transaction.
It is always good to monitor the progress of the transaction. Even with risk management rules and stop-losses. It may be the case to take profits early if the news is not what you expected. You may also decide to raise the profit targets if on the contrary, the action seems positive.
Close the transaction.
Remember that the gain is not guaranteed until the transaction is closed.
Even if this means closing a bad operation at a loss, it is always better to save something, rather than lose everything. At the same time, it might be appropriate to keep a winning position open. It allows profit to increase.
Repeat all again from the beginning.
If you do it the right way, you will see that the average winnings will always be higher than the average losses. Remember that from time to time a winning strategy still requires a revision. And the last keep in mind that there is no perfect strategy.
To give you a head start let’s have a look at some of the most popular strategies traders use on IQ Option broker:
Popular IQ Option trading strategies.
The number of existing trading strategies is enormous. Some of them work perfectly, while others demonstrate lackluster performance. Today we are taking a closer look at 5 popular strategies that you should know and think about giving them a try. Chances are, you will find a strategy that fits your personal trading style.
1. Scalping Trading Strategy.
Several small wins can be just as good as one major victory. When trading in accordance with this strategy, traders set buy and sell thresholds before they open the deal and watch the price of the asset move in the desired direction.
When using the scalping strategy, deals can be as short as a few seconds. Scalpers should be prepared to act fast and make financially-important decisions in an instant. It is worth saying that due to extremely short timeframes, there is no place for fundamental analysis in scalping.
Example of how To Scalp Forex & Stock Market.
3. Breakout Trading Strategy.
Do you remember support and resistance levels? This strategy aims to put them to good use. Usually, when the asset price reaches a certain threshold that it is unable to surpass (called the resistance), it will retrace back and trade at lower levels. However, as many technical experts believe, when the asset price goes above the resistance level, it can be expected to continue its upward rally.
Notice that sometimes the price action can move above and below the resistance level freely and this strategy won’t work.
Example: How to trade breakouts?
News Trading IQ Option strategy.
Probably the most promising strategy for those interested in fundamental analysis. We all know that major news and events are critically important in the world of trading. Almost any asset, be it a national currency, a cryptocurrency, a stock or a commodity, can be moved by a major economic/political event.
Good news tends to move the asset price higher, bad news — lower. If everything is that simple, what’s so complicated about news trading? Predicting the news before it hits the market and making a correct forecast is hard. Sometimes markets behave illogically, and overall positive news triggers a price decrease. So, you have to be prepared for that.
Watch video: How to use news in trading ( IQ Option platform)
Pullback Trading Strategy.
Here is what pullback traders usually do: they find an asset (a company stock or an ETF) with an established positive trend and wait for it to move in the opposite direction. Notice that it should be a short-lived retracement, not an emerging negative trend. You might consider opening a long position when the retracement is about to die out and the price action can be expected to go up once again.
Negative trend.
The same can be done on a negative trend. You might wait for a downward trend to demonstrate limited upward movement (again, not a full-fledged) and might consider opening a short position when the price is at its local maximum.
Watch video how to catch the 1st pullback to find out entry point of the new trend.
Momentum Trading.
The momentum strategy is easy to understand (but not always easy to implement) — when following it, traders wait for the asset to demonstrate rapid movement and then open the deal. The move can be in either direction, as you can open both long and short positions.
Both technical and fundamental factors can trigger massive price movements and should, therefore, be watched closely by the trader. In the case of publicly traded companies, earnings reports and major news are the types of events you are looking for, as both have the potential to change stock prices by a lot. For currencies and cryptocurrencies, technical factors are just as important. Strong upward and downward trends can start with no fundamental explanation.
In order to protect yourself from sizable losses, you may want to use stop-loss orders. Should the price move in the opposite direction, the deal will close automatically, helping you better manage your risks.
Watch some examples of momentum trading strategies.
Following a trading pattern (strategy) – recap.
Whatever the strategy you choose, there are several things to remember. No strategy is fail-proof, all of them will demonstrate negative results from time to time. Consider trying several strategies, finding the one that suits you, and mastering it. Several losing deals in a row do not mean that the strategy doesn’t work. It probably means that you’ve experienced a losing streak. By constantly switching between the strategies you decrease your chances of success. At the same time, don’t be afraid to quit a certain strategy should it really stop working for you.
Source: IQOption blog (2 articles combined and enhanced with videos)
Read more on the subject:
* This is redirection to the official website where you can sign up to IQ Option broker.
