Step one have a trading account
Open a trading account. For purposes of this guide, I recommend you open an IQ Option demo account. It’s absolutely free and easy to get started. Your demo account should have $10000 in it.
Login to your demo account. Choose the assets you wish to trade. These are simply asset pairs such as USD/EUR. You can select the one you wish. Our goal here is to identify a trend. Look at the chart displayed on your screen. You’ll notice a green dot that’s moving up and down creating peaks and troughs. The line it creates indicates the trend.
The trend can be falling, rising or neutral. The neutral trend doesn’t see a lot of price movements and it’s better to avoid entering into a position at this time. You can easily determine the trend your chosen asset is following based on specific time frames. This ranges from 2 minutes to 30 days. You can view these at the bottom of the chart.
Click on the different time frames presented starting with 30 days. Look at the trend for each of these timeframes. You’ll notice that the longer the timeframe, the more complex the trend is. For example, you might notice that trend reversal occurs sporadically. You might also notice that shorter time frames such as a day or 60 minutes give you more reliable data you can use. For example, trend reversal occurs after an average of 7 minutes.
The point I’m trying to make is, when looking at trends, your goal should be identifying similar recurring patterns. These will make it easier to predict the best time to enter or exit a trade.
Enter your trade based on the trend you’ve identified. If you think that the price of your selected assets will rise over a certain timeframe (as you’ve identified in your trends analysis), enter your investment amount, the expiry period and click on the UP button. If you expect the trend to drop, click on the DOWN button. IQ Option will indicate the expected return amount.
This is not really a step but additional advice regarding managing your trading account. Trends based trading strategy might seem very easy and it is when you get the basics of reading charts. However, you should remember that price movements are affected by a number of underlying factors. A trend might suddenly reverse leading to loss of your invested amount.
It’s therefore important that you practice prudent account management. In my case, I will only invest an amount equal to or less than 8.5% of my account balance. For example, if my account balance is $1000, the maximum amount I can invest in a single trade is $85.
This way, even if I incur losses on trades, I will still have enough left in my trading account to enter future trades and recover the loss.
Futures, stocks and options trading involves substantial risk of loss and is not suitable for every investor. The valuation of futures, stocks and options may fluctuate, and, as a result, clients may lose more than their original investment.
The impact of seasonal and geopolitical events is already factored into market prices. The highly leveraged nature of futures trading means that small market movements will have a great impact on your trading account and this can work against you, leading to large losses or can work for you, leading to large gains.
If the market moves against you, you may sustain a total loss greater than the amount you deposited into your account. You are responsible for all the risks and financial resources you use and for the chosen trading system.
You should not engage in trading unless you fully understand the nature of the transactions you are entering into and the extent of your exposure to loss. If you do not fully understand these risks you must seek independent advice from your financial advisor.