How to Choose the Best Trading Strategy with Binarium

Timeframe

The main feature that influences a trading strategy is the trading timeframe. The timeframe is the period in which you wish to keep your deal running. There are longer timeframes of trading, for example, several days, weeks, or months. There is also short-term trading, for instance, FX Options trading, where a deal is held for an hour or less. Of course, each timeframe requires a slightly different approach.

So, the question is how long do you like to keep your trades open? Depending on the timeframe you prefer to trade, you may choose the suitable trading strategy as well as analysis tools you think would enhance your trading methods.

Short timeframes

If your answer is short timeframes, you may focus on technical analysis. Though there is no analysis tool or method that could guarantee absolute success, using indicators may help to evaluate the asset performance on a shorter timeframe and make quicker and more informed decisions. There are indicators that can be specifically tailored for short-term trading as for example The Alligator, The Mass Index indicator, or Moving Average. Several indicators can be used together in a combination in order to receive a possibly more accurate signal.

Short-term traders may use intraday trading strategies like, for example, Scalping and Breakout in order to possibly take advantage of small changes in the asset price. Traders that prefer short timeframes often prefer trading sequences, however it is important to consider the risks involved with this approach.

Long timeframes

If you prefer long term trading, you may pay attention to fundamental analysis, which implies monitoring the news regarding the traded asset. Financial and economic events can have massive impact on associated assets and oftentimes the impact can be quite drastic and durable. Longer time frames are associated mainly with the “bullish” direction, however, you may consider “bearish” positions as well, depending on the asset you are trading.

Mix and match

With that said, it is important to note that these two approaches can be well combined for both long-term and short-term trading. For instance, certain financial news can have a temporary boosting effect on the asset, which short-term traders could take advantage of.

At the same time, technical indicators could be a useful supporting tool for long-term traders. Finding certain features and incorporating them in your trading routine may be a good way of building a personal, custom-made trading approach.

Asset

A preference regarding the trading instrument is another factor that needs to be taken into account when planning your trading approach. Though some traders like to mix it up and trade different assets at different times, most traders focus on one or two instruments and work on improving their skills within a limited amount of assets. Which assets do you mostly focus on when trading?

There is no wrong or right answer, but understanding your target will suggest what aspects you need to consider. For example, Forex lovers need to learn the basic concepts: base and quote currencies, major and exotic pairs, the multiplier, etc. For stock market traders, it is necessary to learn for instance about the company they are investing in, as well as main notions like earnings, dividends and other factors that influence share prices. Fundamental factors are just as important in crypto trading, too. Reading more about the type of assets you are targeting may allow you to understand them better, and, thus, improving your approach.
 

Experience

Novice traders who are just starting to explore the peculiarities of trading may not be ready to use the same tools and techniques as their more experienced counterparts. How much do you know about trading?

If your answer indicates that you are still not sure about the basic concepts, this could be a good opportunity to brush up on them. Before trading with real funds, it is crucial to learn the essential terms that you may encounter in the process. Checking, for example, the common candlestick patterns as well as understanding the purpose of graphical tools and indicators may help with developing a working trading approach, too.

Should you be well-informed about the basic trading tools, you may dive deeper into more advanced trading strategies, like, for instance, the Elliott Wave theory. It does not mean that the methods used by novice traders are irrelevant, it just might be a great way to broaden your horizons and explore the financial market a bit deeper.  

Goals

Setting your priorities in trading is quite similar to setting your goals in life. While some just want to have fun, others are focused on achieving results. What outcome do you expect from your trading?

Though it is not possible to predict if your outcome will be positive or negative, since trading is quite risky, it is still important to visualize your desired result. It will help you understand if you are more of a long-term investor or a short-term trader.

Realizing your goals is also a good starting point for planning a risk management approach. Calculating your capital and the amount of funds you are ready to invest and, potentially, even loose, will help you to decide what methods you prefer to use and help establish the trading routine. For instance, based on the trading capital, a trader will be able to plan the amount of deals they wish to execute.

Realizing the goals in trading is the first step that every trader has to take in order to plan their further activity accordingly. It may help to improve a lot of common mistakes that novice traders make.

Conclusion

Planning a personal trading strategy may seem complicated, however, once you break it into components, it is much easier to manage. In order to make up your own trading strategy.