Create your own Binary Options Strategy, Step by Step
“If you want something done right, do it yourself!” I don’t know who this quote belongs to, but I believe it to be true to some extent. Of course, you cannot take it literally and start building your own smartphone from scratch with no prior training in the electronic field. Don’t build a house if you are not trained for that and if you don’t have the proper tools. Well, you get the picture: you need tools, training, experience and sometime a friend or two to build something so, would it be possible for traders to build their own Binary Options strategy? And if the answer is Yes, then how do you start?
Step #1 – The Trading Tools
First of all, if you want to create your own strategy, you need to have tools which are represented in our field of work by technical indicators, charting packages and almost anything that can help you read market behavior better. It is no coincidence that we have so many available on our site; we know you need it, so we put together an extensive collection of tools for you to use. You will find all sorts of indicators which will help you measure momentum, trend strength, overbought and oversold conditions so all you have to do is look for the ones you need.
Step #2 – The Training
What good are tools if you don’t know how to use them? A hammer is used for hitting nails on the head, not for brushing your teeth with it and that’s why we teach you what you can do with a specific indicator and how to do it. Each trading tool has strengths which you must learn to exploit and weaknesses which you must learn to avoid. Take the time and train yourself in with the help of our Binary Options Trading School. It’s not the regular broker-type of education where all you can learn is “Buy a Call if price is going up and maximize profits” A lot of effort was put into our BOTS school from many expert sources so you will have the real benefit from it.
Step #3 – The Trading Experience
Nothing really substitutes live market trading experience, but you can get a taste of it by using the CommuniTraders platform which basically offers you an opportunity to trade using virtual money, “demo” money. Getting a Demo account from a Binary Options broker can be a daunting task and usually they want you to deposit before they will grant you access to that kind of account. All that can be avoided by using CommuniTraders platform. Maybe there’s no need for me to mention this, but just to make sure everyone knows: It’s Free, of course! Just log into our Trading Forum and the platform will become available.
Step #4 – A Friend or Two…
You went through BOTS school and you are still having trouble understanding how to use a specific tool? That’s why you need friends who can lend a helping hand. You will find us on the Forum and all your questions about trading will be answered in the shortest time.
Get the Show On – Build your Strategy!
Ok, now you have the tools, the training and the experience and you want to build your custom strategy, one to call your own, be proud of, and of course, to profit from. But you don’t know where to start and that’s why you’re reading our articles. Ok, I won’t keep you waiting anymore and although there are no clear steps in building a successful strategy, here are some tips:
Tip #1 – Know how Patient you are.
Are you a short term trader or are you more of a medium to long term investor type? Can you wait for a whole month for your option to expire or is the maximum you can wait is a day? Or maybe you like the fast and thrilling nature of the 60 seconds trading. Once you answer those questions you will also find the answer to the question “What time frame should I use for my charts?” If you need a lot of trades, use 5 or 15 minute charts, but be aware that the lower time frame charts have more “noise” which means that the real market direction is harder to see. If you are a patient trader, go for 4 hour or daily charts which are easier to trade for some. Price action, chart patterns and candlestick formations are usually more reliable on the higher time frames.
Tip #2 – Know the Type of Trader you are.
It is very important to know this because there are two main types of traders: Trend followers and Counter traders. They adopt totally different strategies and you must decide where you stand. A Trend Follower will first determine the trend, then wait for a move against that trend and then trade when price return back in the direction of the initially identified trend. To put it simply, a Trend Follower adopts the principle of trend – pullback – continuation. On the other hand, a Counter Trader will wait to see signs of weakness in a trend and then trade against that trend. So, do you like the safety of trading with the trend or are you better at identifying signs of price exhaustion and reversals? You need to answer that question because you will need to use different indicators if you are a Trend Follower than if you are a Counter trader. We have a wide selection of Strategies so you can use one of those as a starting point.
Most traders consider Trend Following to be the best approach because “The trend is your friend”, but we don’t know when that friend will decide to turn and run away in the opposite direction. What we know for sure is that it will do so eventually. That’s a fact: trends will reverse.
Tip #3 – Know Your Assets
There’s a multitude of assets available to be traded using Binary Options, but I don’t believe that a trader should try to trade them all. Sometimes “less is more” and this is one of those times. Assets move differently, some are trending more than others and some are ranging and noisy. So once you have decided if you are a Trend Follower or a Counter Trader, choose an appropriate asset and learn the way it moves. That’s why I said that less is more. The fewer assets you attempt to trade, the more familiar you will become with the particularities of their movement. Being a good trader doesn’t mean you have to act like a machine gunner, placing trades all over the place, on all available assets. Think of yourself as a sniper who knows his environment, takes advantage of it and executes flawlessly, firing just a few well aimed shots.
Tip #4 – Adapt your Expiry Time
This is a very delicate and important aspect of Binary Options trading and it must be treated as such. A well chosen expiry time can turn a losing trade into a winning one and vice versa. I cannot tell you the right expiry time; instead, you will have to adapt it according to market conditions. Choose a shorter expiry time if the market is galloping and a longer one if you are trading a slow market… or simply test and see which one works best.
Finally – It’s Alive… It’s Aliivee!
If you followed the steps above and you created your very own masterpiece, it’s time to start trading it. But don’t make the mistake of investing real money just yet because you don’t know how it will perform under market conditions. So the right thing to do would be to test it and the easiest way to do it is by using our CommuniTraders platform. Probably your original strategy will suffer some modifications along the way, but it’s better to make those adjustments on a demo account. Oh and… don’t forget to share your strategy it once it’s finished ;)