Several strategies have already been presented. From trend following to counter trend to range trading. All of these strategies have in common that they take advantage of the two predominant market phases, namely trends and sideways phases.
System trading is also based on one of the basic trading styles, but the focus is more on developing a trading system, that is not strictly patterned, but has stability either during trading hours or position sizes. Indicators are often included in the decision-making process.
The idea behind this is as follows: You consider trading as a game of probabilities and ignore everything else. It doesn't matter why the price rises or falls, nor how far it rises or falls. It is important that you carry out the same steps again and again.
How do you build a trading system?
A simple trading system works like a coin toss. You can say you go long today and short tomorrow. So you buy z. B. today a call and the next day a put. Since you hide all other market information, it is very simple.
After a while, the system can be optimized, since during the evaluation you find out when the probability of calls or puts is highest. Therefore, bookkeeping is essential if you want to change the 50:50 probability in your favor.
From the evaluation, the trader not only recognizes when the probability of calls or puts is highest, but also his Control position sizes. Every beginner would first increase the position sizes after a winning streak. But this is exactly where the crux is. If the option trader increases the position sizes, he naturally loses more with a subsequent losing trade than he won with the previous one.
The trick is to increase position sizes, or in the case of binary options investment volume, if a series of losses has occurred to achieve the opposite effect. This is of course difficult and does not correspond to the logical way of thinking. An equity curve can make rethinking a little easier.
Equity curves represent a chart of how trading went over a period. If the equity curve rises, the system is profitable. On the other hand, the system has to be optimized. However, the period should not be chosen too short.
If the trader has implemented a functioning system, this can be seen in the equity curve. The equity curve is comparable to the price of a share. Share price gains are comparable to the price gains of trader performance.
So if the share price is currently in a weak phase, then you can see that either from a sideways movement or a downward trend. The trader of the stock wants to buy at a cheap price, so he waits until the price has receded until the trader thinks it would be a good start. That means he invests when the price declines.
In the case of the investment size, the trader of binary options can do the same. If his performance declines, in most cases it means that the market phase in the underlying he is trading is currently not compatible with the trading system.
But phases are fleeting, and bad phases are followed by good ones. And this is exactly the moment that should be exploited by making a slightly higher investment, as if you were buying a share at a lower price.
System trading with Anyoption
That pure system trading in the simplest way as shown above is also known as flip coin trading. All you have to systematize for this is the trading time, the trading direction, the underlying and a slight optimization in terms of risk management using the equity curve.
A system could look like this:
Tradable value: Oil (WTI)
Direction: Call / Put / Call / Put
Duration: 1 hour, once a day
Investment: € 100, after winning streak 50 €, after a series of losses € 150
With the broker Anyoption, system trading can be implemented well. A demo version of the trading platform is also granted. The simple system can be tested in this way.
BINARY OPTIONS: TRADING FAIL. BINARY OPTIONS DANGER. BINARY OPTIONS TRADING SYSTEM ( BINARY OPTIONS)
There are now a number of trading systems, but the simplest could be the most effective. The simple coin toss strategy, which is optimized over time and thus a probability ratio of z. B. 55:50 already means that the system is profitable in the long run.
Using the equity curve, the trader can see in which phase his system is currently in terms of the traded value and react by making investment adjustments.
Click here to learn more about the Martingale system.