Even though trading binary options can seem risky because they involve gains and losses, some traders prefer to stay on the safe side and try to minimize or avoid risks altogether.
Risk tolerance refers to the degree of risk that a trader is willing to withstand in their trading activities. It determines the trading strategy that a trader will adopt. Throughout the trading period, risk tolerance is bound to change. For this reason, it should be assessed regularly, especially in the face of financial or lifestyle changes.
Indeed, it is impossible to completely eliminate all adverse factors because financial transactions can be used for speculation by large investment companies that have a lot of weight and influence. If you are a freshman in trading you should look for conservative risk managing strategies that reduce possible risks to an acceptable minimum.
Read more about the trading strategy called the “Jeweler”. Its telling name means a jewel cutter, the profession that requires precision and accuracy. The advantages of the system are accessibility and feasibility. You can find and set up all tools for trading with a platform IQ Option.
How to prepare to trade with “Jeweler” strategy
We will start with the words of caution. You should remember that the Jeweller Strategy does not work with all assets. It shows the best results and high profitability with a highly volatile assets and trending market.
In terms of market, the strategy should be applied ONLY in the direction of the main trend. All experienced traders learned how to trade on the trend before trying something more complicated.
The Jeweler Strategy is built on three indicators to minimize risks and exclude the possibility of mistakes in decision making. The three indicators you will need for market analysis and signal generation are:
- SSMA with a period of 50. Use it for trend detection.
- RSI with a period of 14 and a single level of 50. It will indicate the strength of the trend and help you avoid the situation when the movement is false or on the run.
- ADX with default settings. Use it as a tool for signal search. You will see a positive (+Di, blue) and negative (-Di, red) line. The main ADX line can be ignored, so you can disable it in the settings, if the terminal allows.
How to buy options with the “Jeweler” strategy
You should trade on the lower time frames – from 5 to 30 minutes. Those time frames are considered the most reasonable, taking into account the specifics of the market of digital contracts.
The strategy is not applicable for turbo options because of high risks. With the Jeweler Strategy your primary goal and advantage is to avoid risks. So, after installing and configuring all of the tools in the terminal, you can proceed to signal search and contract purchase.
The CALL option is done when the market is above the SMA, the RSI is above the 50 level and the blue ADX line crosses the red line from bottom to top.
The PUT option is done when the market is under the SMA, the RSI is under the 50 level, and the blue ADX line crosses the red line from top to bottom.
The term of the contract should not be less than the period of formation of three bars or candles.
When building a trading strategy, traders should formulate clear goals that they aim to achieve. A good trading strategy should be consistent, objective, quantifiable, and verifiable. The Jeweler strategy will be a real godsend for those who are not ready to take risks and stick to conservative trading. It is true that the reality of financial markets is that those who are willing to take risks are the ones who achieve great success.
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.
GENERAL RISK WARNING