What is a trading Strategy?

In the terminology of finance, a trading strategy is a long term plan that is designed to make profits by executing a number of deals in the market. A properly researched trading strategy is developed after analyzing all the market variables and as a result, a thoroughly researched market strategy has a certain level of verifiability consistency, flexibility, and objectivity.

Making a Trading Strategy

To make a trading strategy, the first and the foremost thing of importance is to research the market. Conducting a thorough and extensive research on the market, analyzing all the variables which may affect the trades and shaping the strategy likewise are the best steps to make an overall profitable strategy.

Why Have a Trading Strategy?

The main goal of having a trading strategy is to capitalize the investments made in the field of binary trading. The biggest benefit of having a proper trading strategy is not that it maximizes the profit but the main benefit is that it minimizes the risks in the trading niche making the trading game overall more profitable. Before we move on to some of the actual strategies, you must keep in mind the points given below:

  • Never invest all of the capital at once
  • Analyze the market dynamics before you actually invest
  • Practice any of the strategies by investing in parts of 5 to 10 percent of the capital in a step.
  1. Trend Strategy

This is the most basic trading strategy used by the beginners as well as the experienced traders. This is also known as the bull-bear strategy. The trader has to keep an eye on the trend curve of the asset to be traded and to monitor the rise, decline and flat line trend of the line. If the trend line is flat and the trend is expected to go up, then no touch option is adopted.

  • If the trend line shows a rise, choose CALL
  • If the trend line is on a decline choose PUT

This method is quite similar to the call put option except the fact that  prices are fixed here which must not be reached before the action is taken.

  1. Pinocchio strategy

This strategy is the one to be used when the asset price is expected to go drastically up or down in a short time. If the value of an asset is expected to drop, select PUT and if is expected to rise, select CALL. Most of the trading accounts offer this strategy.

  1. Straddle Strategy

This is the strategy to be used in the time of unpredictability of the market. The examples are the situations created by the breaking of important news or other such circumstances as they tend to falsify all the predictions made about the market by the experts. This strategy enables the traders to avoid opting for a specific CALL or PUT option.

The basic theme of this strategy is to utilize PUT whenever the value of an asset increases with an indication or expectation that it will fall soon. Once the decline sets in, the trader places a CALL on the asset and hopes it will bounce back soon. The strategy is actually a reverse of the normal trading strategies. You can get some great strategy ideas using the mini hedge fund at Trusted Binary Reviews here.

  1. Risk Reversal Strategy

This is one of the most regarded and most widely practiced strategies by the professional and experienced traders across the world. This strategy is a little complex one but if implemented correctly it tends to eliminate the risk and maximize the chances of profit in the trade. The strategy is to place both CALL and PUT options simultaneously on individual assets. This is especially useful when trading with assets having volatile market values. The basic principle working at the back end of this strategy is very simple. Placing opposite predictions on different individual stocks of the same asset guarantees that at least one of them will end up giving a positive outcome.

  1. Hedging Strategy

This strategy is also known as the pairing and is one of the most commonly used trading strategies not only in binary options but also in traditional stock investments and corporations. This strategy focuses on minimizing the financial risks in the trades while trying to take the minimum toll on the profits. The strategy suggests putting both PUT and CALL options on the same asset at the same time. This means that, regardless of the asset value, the trade will always be successful and the outcome will be positive. This strategy is regarded as an insured method that protects the investor in any given condition.

  1. Fundamental Analysis

This strategy is adopted basically to analyze the market to determine a strategy for the future. It consists of investing small (insignificant) amounts of money on the new assets before you actually start to trade them. The results are studied and analyzed to make a strategy that will be the most useful for any given asset.