Have you just made a conscious decision to make trading a part of your life? If so, you probably have lots of questions, and the most broad but important one would be <How to trade?>. You are not the first one to wonder what it all starts with. And you have yet to figure it all out, but we will try to answer several of your questions in this article to give you some idea of how it all works.
What is trading on the IQ Option platform?
Trading on IQ Option is of Contract For Difference (CFD) type, which means that when opening a deal on the platform, you do not acquire the asset, but you are investing in the price development of the asset and your payout depends on your predictions.
There are two types of deals — <Long> and <Short> ones. You open a <Long> position by clicking <Buy> and it means that you invest with the prediction of the price going up. To open a <Short> position, you need to click <Sell>, which means that you are expecting the price to drop.
Once you have opened a deal, you can keep it for as long as you like and close it whenever you deem appropriate based on your trading strategy. You may also use tools like Take Profit, Stop Loss and Trailing Stop in order to control the amount of desired payout and manage your loss.
Up or down?
The decision you make about which direction to invest determines the outcome of the deal for you, so it is really important to study as much as possible to be able to invest wisely. What can you do to make the correct prediction? A prediction should be based on an extensive study of the market. There are two ways to do it and you may even combine them.
One is Technical analysis — the attempt to predict the future movements of the price based on the past activity. Technical analysis is performed with indicators that apply special calculations to the chart to help identify the trend, its direction, strength, volatility etc. You may use several indicators at the same time in order to see the full picture before you make your next deal.
The other is Fundamental analysis. It involves analyzing the economic situation by following the market news. This approach is good for long-term deals, but also allows you to trade certain important news that bring dramatic fluctuation of the price.
Both of the approaches work, however, you should always remember that there is no 100% guarantee. No one can know the future for sure, and it applies to the market as well. Your task is to make the most out of the information you have and the analysis you perform.
What if I lose money?
Trading brings no guarantees to the table and managing your risk is just as important as studying the market. Be realistic about your payouts and do not get overly excited and emotional — it will end in you risking too much, investing what you can not afford and losing hope and money. It does not have to be like that.
Start small, find the strategy that fits you and come up with a trading plan. Once you have built a strategy — stick to it and do not let yourself go off track. Do not overlook risk management strategies, be consistent and you will see progress.
You will have many questions along the road to become a trader, but you should not be afraid of them. You will acquire knowledge gradually, at your own pace and you will feel more confident and calm with time.
NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
In accordance with European Securities and Markets Authority’s (ESMA) requirements, binary and digital options trading is only available to clients categorized as professional clients.
GENERAL RISK WARNING
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
77% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.