Your trading strategy will make or break you. Having no discipline and just trading the assets that you want when you want might work once in a while. But the odds are that it will not lead to long term success, and that means you will end up losing money. The problem with telling you that you need a trading strategy is that there are hundreds of different strategies out there, and many of them will simply not work for you and your particular circumstances. So, not only do you need a trading strategy, in order to be successful, you need the right trading strategy.
How do you find it?
First, you need to look at what type of trading you’re doing. The truth is, something like trading binary options is a lot easier to formulate a strategy for than trading within the Forex market. One isn’t inherently “better” than the other, or more “professional.” They are just different, and the nature of binary options is that there are fewer things to worry about, and this makes strategy a little easier.
Binaries are a touch easier to plan for because of the simple fact that timing is done for you automatically. The same is true for the rates of return. This makes certain elements of trading a lot easier, such as applying a formulaic approach. A lot of people like to use something like a Martingale system to trade binaries, simply because there are so many holes that can be filled in within the formula with concrete numbers. Pretty much the only thing you will need to estimate is the chances you have of success, and this is something that you will develop better over time. Still, even this little bit requires a lot of skill and a series of incorrect guesses can lead to a loss over time.
There are a lot of little things that you will need to be aware of with binary options, especially if you are focusing on short term trades. The 60 second binary options have a very high variance rate, meaning that even a skilled trader will be wrong much more often than usual. And because these have lower rates of return, you will inevitably not make as much money with them. They are still valuable, though, because you can easily execute 50 or more in a single day without a lot of effort.
A good approach will vary expiries in order to add a little diversification. This is useful, especially if you are not diversifying with the different assets you are trading. Binaries allow you to trade stock, indices, commodities, and currencies, but most pros only focus on one or two individual assets. But you can gain texture by trading the same asset over both short and long term expiries.
Trading currencies in the traditional sense is tough, but it can be lucrative if you are good at finding movement. That’s the key with Forex trading; you need to time your trades in order to milk them for as much volatility as possible. The faster something moves, the less time your money is tied up and the sooner you can start making another trade.
You will not find as much variance in the Forex market, and that’s a good thing. It means that your success rate will be higher. You may find, though, that your profit rate is done on individual trades. Whereas when you’re right with binaries, you are earning 80 percent in return, you might find that you’re only making 4 or 5 percent on a really good Forex trade. This seems awful, right? Well, in one way, it is. But if your correct trade rate is 90 percent, as opposed to only 60 percent with binaries, you will find that you can make around the same amount of money at the end of every week. It’s a fine line, but if you can balance the risk, Forex trading strategies can be just as effective.