We talk so much about Binary Options strategies, good or bad, free or not, scams or legit ones, but what exactly is a trading strategy and how do we differentiate the crap from the gold?
What should a good strategy look like?
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To make the long story short, a strategy is a set of rules that you follow when you trade binary options or any other financial instrument. The development of a strategy is composed of 8 steps, which include formulation defining the rules , translating those rules in computer-testable form , preliminary testing , optimization , evaluation of performance , trading the strategy , monitoring performance and finally , refinement and evolution.
What are the main parts? Well, according to me, here they are: How many trades can I open at the same time?
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One more thing you should know about trading strategies: The technical strategies include chart patterns , candlestick patterns , indicators, price action, support and resistance, while the fundamental strategies are related to macroeconomic and geopolitical events like interest rates, employment data, inflation data, press conferences, speeches of heads of central banks, etc.
Did you ever hear a guy saying something like: There are guys for whom buying a Call or a Put is a strategy. Instead, I consider that the strategy is the reason behind my purchase of the Call or Put and it has to contain predetermined conditions that need to be fulfilled for me to enter into a trade.
Let me elaborate on that with the use of the always helpful, Mr. A picture is worth a thousand words so the explanation of a strategy should always contain at least one picture of a valid signal provided by that strategy. A good source of strategies is YouTube, but… be very careful if you choose to use a strategy found there because a lot of them are just uploaded for promotional reasons, to make you invest using a certain broker or even buy a certain product.
Finally, I think that a solid strategy should have a basic structure similar to the one below:. Why should I buy a Call or a Put? When should I get out of a trade if it goes against me? Any good strategy should give you the answer to that question. Most brokers have tools that allow you to close a trade before expiry time and your strategy should tell you when to get out and receive back some of the amount invested in that trade.
How much should I invest in a single trade and how many trades should I have open at the same time? Now think about this: There are traps for new traders everywhere and one of the most dangerous is the Brain Wash Strategy scam.
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Let me tell you what that looks like. There is a long website where you can only scroll down to read some endless and regurgitated garbage about how much money you can make practically overnight. Here are some more hints.
After seemingly thousands of scrolls down I get to the Testimonials where other regular people like me, tell me how much money they made… yeah right, and I was born yesterday. But a question still bugs me: If the strategy is that good, he could just place some trades and make huge amounts of money — a lot more than he would make by selling it.
And most of the times the advertised broker is a scam as well. If the new guy also buys the strategy… well, two for the price of one… time to party for the scammer, because you know what the next step is once the money is deposited? The black hole of the scam realm absorbs it all… and if you try to withdraw, the problems start to appear. My blood pressure starts to rise because I know that things like that really happen.
So I am going to wrap it up with a final piece of advice: Also, do not collaborate in any way with a broker advertised on one of those sites. There are probably thousands of trading strategies all over the internet, some are good, some are bad and some are just disgustingly stupid.
But unfortunately I cannot give you a clear map as to where the right strategy is located because every trader has a certain mentality and comfort zone. A recommendation regarding a strategy is OK, but ultimately, you have to decide what strategy suits you and what you are comfortable with.
I like trend following strategies and I recommend them, but I would never try to convince anyone to use a strategy just because I like it. I mentioned the Holy Grail in the opening paragraph, but some of you might not be familiar with this term used for trading strategies: The good news is that with enough work, discipline and perseverance and probably some other important stuff that I forgot about , you will come close to your own Holy Grail.
To get started with some basic Forex education, I recommend one of my all time favorite: Another great source is Forex Factory and last but definitely not least, the BOTS.
There you can find new strategies and educational articles almost every day so make sure you check it regularly. The importance of a reliable strategy is crucial if you are serious about making money out of trading. But equally, or even more important, is your mindset and your psychological approach of this business. Yes, the path is difficult but ultimately, rewarding.
Avoid them at all costs and think about this: I completed the entire Pre School, and then started with the first article in Primary School What is a Binary Strategy. Maybe I just missed it, but if not, being the first thing in Primary School, I am already lost? I see your problem Craig, but the strategy about ADX contained in teh article we are talking about is just an example to see how a well structured strategy looks like. Notice it has a picture explaining entries and also clear summary of the rules to enter Call or Put.
Some strategies are fuzzy and the author just gives guidelines, not exact rules. U can disregard it and read the rest of teh article if you like it better that way.
All the best man. Thank you for the wisdom. For question regarding brokers — Please use our Forums.
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