Trading has become a popular business in today’s increasingly mobilized workforce. People are understandably switching from their dead-end day jobs to home-based enterprises that grant them freedom and independence from the stressful corporate lifestyle. But while trading involves the simple concept of buying and selling financial assets, being a consistently profitable trader takes certain tools, one of which is a solid and proven strategy.
Importance of a Good Trading Strategy
Trading without a strategy is the quickest way to bankruptcy or at least it will do the trick of emptying your account in the first few months. A strategy gives you a systematic, scalable, and measurable approach to trading. You can gauge personal risk threshold, market cycles or patterns that complement your strategy, and even economic reports that should be avoided. A well-defined strategy also makes trading less stressful by filtering bad setups and only showing the potentially profitable ones. Of course, the results of a strategy will be dependent on its parameters. This is why it’s important to proactively work on your strategy and make refinements when necessary.
How to Build a Trading Strategy
Piece together what’s important. In trading, you have to know your capital very well. Know the risk per trade you can sustain over an X period of trades, the financial sectors and markets you want to build your portfolio with, the time frames that will work best given your lifestyle and work obligations, etc. Once you’ve collected data, you can begin looking for strategies online or create one yourself. People with programming skills can even create scripts for trading strategies and indicators through a trading platform like UltraTrade.
Factors Affecting a Successful Trading Strategy
Account balance. How much money you have in your account affects the number of losing trades allowed before you have to either lower your position size or fund your account with more money. A $1,000 trading account, for example, cannot trade five mini lots of New Zealand Dollar/US Dollar since it does not leave enough room for the position to move against you before being automatically closed due to a margin call.
Programming skills. Scripting is a nifty skill you can implement to forward-test and backtest a particular strategy. While the output of either tests cannot show a clear and precise output of profit or loss, it does give you an idea of what the strategy can produce when run in a live trading environment.
Platform used. The broker and platform you use will play essential roles in your trading career. An easy-to-use yet intuitive platform like UltraTrade gives you the tools to trade a wide array of assets, particularly binary options. Binary options is a simple instrument to trade with, especially for beginners, since there’s only two possible choices to pick from – Call or Put. Pick a platform you are most comfortable using and is backed up by round-the-clock technical support team.
Sound mindset. For most traders, their doom doesn’t exactly come from the lack of a good strategy, but from failure to stick to their strategy. It’s very common for inexperienced traders to abandon their strategy whenever it produces a string of losses. They fail to acknowledge the fact that there is no Holy Grail system that grants them full immunity towards trading losses. Having a sound mindset arms you with unyielding discipline to follow through with your plan even during stressful times.
Tips For Implementing Your Strategy
If you’re all set to trade with a strategy you’ve researched or created, the first step is trading through a demo account. A demo account is a simulation of the trading environment without the actual profits or losses involved. For those who wish to trade with a live account, funding a small account and only trading micro lots makes strategic sense. You don’t want to be putting all your eggs into that one basket or strategy that you have yet tested or proven.
Examples of Strategies For Online Trading
Trading binary options, stocks, forex or any financial asset for that matter involves similar strategies since it’s all about price movements of the market in a given time frame. The simplest strategy for beginner traders is a trend trading strategy. One can judge if a market is trending through the use of a technical indicator known as moving averages. When used on a platform like UltraTrade, moving averages plot a line that gives a visual indication of price direction over an X period of time.
Strategies only play a part in your success as a trader. Professional traders who make consistent profits know that success in trading is an intersection between a good strategy, solid risk management rules, and luck. Failing to work on the other two factors will still lead to loss in the long-term, irrespective of a highly profitable trading strategy.