So, you’re not only looking for a simple trading strategy but a simple trading strategy that works? Well, let’s stop and consider what we need in order to make a basic trade first: an entry point. Once you have an entry point for yourself, you’ve begun trading. Is that coveted strategy this simple? Well, not quite. There are still other things to consider when coming up with your formula.
WHAT TO EXPECT WHEN TRADING
What happens when you begin to trade? You’ll either win or you’ll lose. Following me so far? Great. Now, what makes your simple trading strategy not so simple anymore is the fact that your winning trade might start losing. But, then, that losing trade might end up recovering. However, did you stick to that trade or let go of it? And if you stuck to it, you’ve got yourself a profit now. But, what are you supposed to do with that profit?
Therefore, the simple mechanics of winning and losing are what can turn your simple trading strategy upside down. It’s the basic foundation of risk-taking and gambling. Say your starting pot is £ 1000 (or $1000, depending on your currency). What’s going to happen if all of that money is gone throughout the process of trading. Then, there’s no more trading for you for a while, until you can come up with more money and quite possibly a new strategy.
So, in the end, it’s crucial for you to not lose all of your money on a bad trade. That’ll send you right back to the drawing board.
IMPORTANT THINGS TO CONSIDER
Now, because of this, there are two important things for you to consider. The first is the size that you’re willing to trade. If you’re working with £1000 and only want to risk 10%, that leaves you with £100. Alright, decision made. The next thing to think about is making sure that the money you bet is all that you risk. You can do this in two ways. You can either use an option or a binary bet to purchase your trades at a maximum of £100. Therefore, that’s all you’re going to lose. You could also look into spread-betting, which features what’s called a stop, which will get you out of your trade at a predetermined point, containing any potential loss at a chosen level.
By doing either, you’ve put a limitation on the downside of trading. Congratulations on that because it frees you up to focus on the fun stuff: profits.
There are two formulas you should look for in order for a successful profit: either lots of small profits with a high success rate of 70% or a few really large profits with a lower success rate of 50%. (Tweet this)
It all depends on your preference. However, we’d recommend the first option, making your strategy simple through what’s called gap trading.
There are so many positives to gap trading. It allows you to get trades most days, gives you a clear entry, as well as a clear exit and profit point, and provides many winning trades and fewer losing trades. Intrigued? Want to buy our simple trading strategy? Click here.
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