Trading

2 min. reading time
4/4/2019

ayondo quick guide - How do I develop a trading strategy?

Trading offers an exciting alternative to conventional investments but a trading strategy is required to successfully trade the markets. There are endless opportunities for new traders, but where to start?

ayondo quick guide - How do I develop a trading strategy?

Trading offers an exciting alternative to conventional investments. Online brokers offer you easy and fast access to the markets. The Forex market for example, with a daily trading volume of more than 4 billion USD, offers enormous potential for traders.

There are endless opportunities for new traders, but where to start? Entering trading unprepared increases the potential for loss, so a plan is important. A trading strategy is required to successfully trade the markets.

But how can such a strategy be developed? What matters and what questions should you ask yourself in advance?

Setting realistic goals

Again and again we hear about high flyers who achieve a two-digit or even three-digit performance from trading the financial markets in just a few months. Such performance figures however should always take into account the risks taken and the trading experience. At the beginning it is therefore crucial to set realistic goals that match your risk appetite. By having one set goal in mind it’s easier to later on consistently implement a trading strategy.

Daytrader or Swingtrader?

Depending on how much time you want to dedicate to trading, you can adopt either swing or day trading techniques. If you cannot or do not want to observe and analyse the markets on a daily basis, you may be better suited to swing trading. If on the other hand you have the time to observe the markets more closely, you could also try day trading.

What moves the financial markets?

In order to be able to trade the markets successfully and to develop a trading strategy or a suitable setup, it’s necessary to understand the financial markets. What influences the financial markets and what are the consequences of these influencing factors?

Stocks, Forex or Commodities?

The world's financial markets offer a multitude of tradable instruments. Whether indices, stocks, commodities, forex or cryptos - with financial products such as CFDs you quickly and easily have access to the markets of your choice! Which markets do you want to trade and which factors influence them? The same applies here: Don’t enter the market blindly without prior knowledge!

The right setup

The first decisions have been made. Now it's time for evaluating the data to be used in the trading strategy. Would you like to use indicators, apply market technology or analyse the markets fundamentally? Do you trade cyclically or counter-cyclically?

Extensive testing

The euphoria is great once the trading strategy is in place, but will it really be profitable? Of course the future can never be 100% predicted, but the trading strategy can still be tested for profitability by extensive testing based on the past. Many brokers as well as ayondo offer demo accounts to first test your trading strategy on a risk-free account.

Continuous optimisation

You have completed the trial period and are now applying your trading strategy on a Real Money account. Is there room for improvement? Are there any things that weren't considered when you first set up your strategy that you maybe still need to consider? Does your risk and money management fit in with your trading strategy? A trading strategy is rarely optimal in the long run. Therefore: keep your eyes open and recognise optimising potential!

 


This information should not be interpreted as investment advice or any recommendation.