In order to achieve success in the trading sphere, it is vital to adhere to a specific approach. In this case, we are talking about a cohesive system, including multiple aspects, not only about one trading strategy. Every experience market participant has their own personal approach, enabling them to trade under optimal conditions that are suitable for them specifically. However, this point isn’t any less important for beginners. At this stage, precisely, every beginner should start to work out their own approach to trading with options. In this article, we will look into how you can do exactly that. We will present 5 key aspects.

Forming Your Own Personal Approach to Trading with Binary Options

Deciding on a Time for Trading

The futures market open around the clock. This is a result of global time differences, for instance, it may be night in one country, and working hours in another. Therefore, this enables traders to trade at the time that best suits them. The majority of users prefer to work during the day, or in the evening. However, the functionality of trading platforms, allow for trading at night as well. That being said, the activity duration periods have their own particularities.

Schedule of Trading Sessions (Moscow Time):

• European — opens at 11 AM, closes at 8 PM;

• American — opens at 4 PM, closes at 1 AM;

• Pacific — opens at 1 AM, closes at 10 AM;

• Asian — opens at 3 AM, closes at 12 PM;

Day trading, meaning during the daylight hours (in Russia, CIS countries, and Europe), is a more active period for trading. The markets are at their peak activity at that time. This is due to the fact that most of the large financial centers are concentrated in Europe. Additionally, in the second half of the day and in the evening, the American session is also active, so this contributes to the increase in market volatility even further. During the daylight hours, more aggressive strategies are better suited as they are highly effective on clearly distinct price movements. In the peak of the European and American trading sessions, quiet periods, when the price moves horizontally, are very rare on the market.

Night trading takes place after dark when the European and American sessions are closed. However, the Asian market opens at this time, and there are also large international financial centers there on par with Europe and America. Therefore, it is a subsequent market revitalization. Asian currencies are actively traded at this time, such as the Japanese yen. Although, the general level of volatility is comparatively lower than during the daytime. The night period is a time when you should give preference to more conservative trading tactics and strategies, which are suitable for trading on a quiet market, where there are nearly no sharp spikes in price.

When the session opens and the market changes over, the so-called “window” opens, when key news is released. It has serious influence over the market, often provoking very strong and sharp price leaps. This creates a great opportunity to profit from trading the news. However, this type of market behavior can cause substantial financial losses for those traders who exclusively use technical analysis. Therefore, it is recommended to refrain from trading during this period if you rely solely on technical analysis, as these methods are ineffective under these conditions.

The Selection of Trading Assets

Trading on the futures market gives you a wide spectrum of assets from various categories to choose from. So, for example, on the most of platforms, there are several dozen trading tools you can access, beginning with currency pairs, ending with cryptocurrencies and stocks from large companies. From the perspective of analysis, every asset has its own particularities and differences. Compare charts with identical timeframes to best understand just how strongly they differ from one another. We’ll go through a short overview of every type of asset separately.

  1. They are one of the more popular types of trading tools, widely available through Forex (Foreign Exchange). They come in pairs, formed by taking the currency of one country and trading against another, for example, the Euro against the Dollar. They are set apart by their high volatility and positive responsiveness both to methods of technical and fundamental analysis. The more popular pairs are the EUR/USD, the AUD/USD, the UAD/CAD and others.
  1. Securities, which show the general level of corporate capitalization. Usually, on binary options platforms, assets from large companies are traded, such as Microsoft, Coca-Cola, Apple and so on. Traders who use these options usually prefer trading with methods based on fundamental analysis.
  1. This special type of asset reflects either a specific modern industrial sector or the industry of a country as a whole. For example, the Dow Jones index reflects the sum total capitalization of all the companies in the concrete US industrial sector. This type of asset is known for its flat, yet sustainable trends. So they are suitable for both fans of fundamental analysis and technical.
  1. Raw material. Fuel, precious metals, foodstuffs and any other good marketed on the exchange fall into this category. The more popular assets in this category are gold, silver and also oil. The overwhelming majority of companies allow their users to trade precious metals.
  1. Cryptocurrencies represent a novelty to the world of financial products, unlike any that already exist. The triumph of the popularity of cryptocurrencies began after the breakout success of Bitcoin when it grew more than 15 times in one year. This attracted the close attention of many to this sphere from many different directions. There are no brokerage companies left, who have not added this type of asset. However, it is worth noting that the standard cryptocurrency pairs (for example the BTC/USD) usually have relatively low levels of profitability, from 10-30%. Although on the platforms, there is the unique asset, the crypto index CRYPTO IDX, which is the average value of several popular cryptocurrencies. This tool is best suited to technical analysis.

Beginners are better off starting with traditional currencies, such as the EUR/USD. However, if you are trading on best and reliable trading platforms, then you can also use the crypto index. This asset is unique in its “sensitivity” to signals of technical analysis systems.

Deciding on a Trading Strategy

The trading strategy is a key point that your trading success as a whole depends on. This is composed of principle and rules that enable you to define the optimal moment to place a trade on the market.

There are various approaches to market analysis, nonetheless, all of them aim to work out the most accurate forecast. Strategies are categorized by many different criteria, however, we will give you an overview of the most basic. So, there are two approaches to market analysis, technical and fundamental. We will consider both in further detail.

Technical Analysis. This system is based on the use of indicators. It is based on the principle of conducting mathematic analysis on historical chart data. This allows you to forecast future market tendencies of price movement with a high level of certainty. One of the principle tenets of the theory of technical analysis is the assertion that the market moves in accordance with firmly established rules. Therefore, the pattern of past price behavior is applicable to future forecasts.

Fundamental Analysis. A different approach to trading is based using economic news as the primary source of information, not a currency chart, for constructing forecasts. This methodology is more difficult, however, its potential is more substantial (for professionals). Average traders can successfully earn profit from the strategy of trading the news. The task is simplified thanks to the “Economic Calendar”, which is a structured and organized list of the most important news and events.

Technical analysis, in turn, is made up of two subcategories, indicator strategies, and Price Action systems. In the case of the later, traders develop forecasts through virtual chart analysis. Producing an analysis of the character of the current market tendencies, such as the presence of recoil periods, price channels, the levels of support and resistance and so on.

Testing How Effective Your Trading System Is

The market offers a large selection of different trading strategies. Quite a few of them are accessible not only to market professionals but casual traders as well. However, the effectiveness of the system isn’t defined on how professional the trader is, but in the possible real results, achieved by using it in practice. Therefore, in order to choose the optimal trading strategy, you need to test its effectivity. There are two fundamentally different approaches to testing the effectivity of trading systems.

  1. Testing based on historical data. Traders test the signal quality by analyzing historical chart data. For example, with the required set of indicators added, the total of true and false signals are calculated. What is important is the percentage of profitable and losing trades. It follows that the real percentage of profit for options is 70-85%, not 100%.
  2. Automatic testing. There are systems that enable you to test the effectiveness of trading systems through historical data automatically, free from any manual calculations. For example, automatic testing is available in the “Live Chart” service on Trading View.
  3. Testing on a demo account. This step allows you to test the strength of strategies in “field conditions”. The technical conditions for trading on a demo account are completely the same as on a live account. Practical testing of a strategy on a demo account is the most effective.

It’s vital to test for effectivity on every new trading system. Testing new trading systems on live accounts more often than not leads to losses.

Money Management and Hedging Risk

Trading on the exchange or on the futures market is associated with high levels of risk. Therefore, money management is a key trait of successful traders. Moreover, you could call it the pinnacle in the hierarchy of importance. Trading on the futures market, including on binary options platforms, implies handling money. Therefore, every investor should correctly manage their capital. There are a variety of general principles you must follow in any situation, regardless of which concrete trading strategy you are using or any other factors.

Money management is a system for managing your trading account balance so that the risk of losing funds is kept to a minimum. The main principle of money management is limiting the maximum financial investment on any one option. The standard limit is 3% of your deposit. Note that this isn’t calculated based on the balance of your account after your last replenishment, but on the actual balance in your account at the moment you place the trade.

When trading on the market, profit and loss are measured in percentages. Therefore, the risk level significantly depends on the size of your trading capital. The lower the percentage of the deposit the investor uses in a trade, the lower the risk. For example, 2% of tens of thousands of dollars has a significantly different value in terms of earnings. It follows that when trading with minimal funds it is often impossible to follow the rules of money management.

The Primary Principles of Capital Management:

• In any one trading operation it isn’t advisable to use more than 3% of your deposit, at the most 5%;

• The maximum total investment tied up in several parallel trading operations shouldn’t be more than 10% of your balance;

• The use of the Martingale system should be limited if doubling the rate causes you to break the first rule.

When placing parallel trades, do not repeat positions on the same asset in the same direction. In actuality, that is doubling your investment. Select assets that are completely independent of one another.

Conclusion

We have provided a general overview of the basic range of personal approaches for trading with binary options successfully. In closing, it is worth noting that learning is the main task for beginners. It is the last thing a beginner to trading should save. The market provides a fair amount of companies, primarily focused on beginners. They are set apart by their numerous educational materials and attractive trading terms for a safe start with minimal deposits required.

INVEST IN CRYPTOCURRENCY

“General Risk Warning: Binary options and cryptocurrency trading carry a high level of risk and can result in the loss of all your funds.”

Forming Your Own Personal Approach to Trading on Binary Options
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