Understanding the Implementation of Knock-on Effect Strategy Part 2

Understanding the Implementation of Knock-on Effect Strategy Part 2

Submitted by adil on Thu, 08/14/2014 - 19:30

Round 2 of the Knock-on Effect Strategy

In the first part of this article, we reviewed the basic principle behind the Knock-on Effect strategy. Some preferable asset combinations were also analyzed to see how this strategy can be beneficial to every binary option trader. In this we will review the challenges this strategy offers to the traders, its limits and how much you can expect improvement in your trading results by implementing knock-off strategy.

The challenges in implementing Knock-on Effect strategy:

Also known as market pull strategy, this strategy may seem to be the fast track to success in binary option trading. But the fact is, the trader must acquire a lot of knowledge and information about the assets he plans to trade with this strategy if he wants to actually increase the number of winning trades.

The trader must also analyze all the factors that make the correlation between two specific assets happen. The trader must also analyze those factors consistently so he will know if there is any chance in the near future that the correlation might not hold true.

Clearing some misconceptions:

There is no strategy in any form of trading that completely “eliminates” losses and guarantees 100% successful results. This fact also applies to binary option trading. So, if you want to become a successful trader,

DON’T:

• Waste time by looking for a strategy that may provide you 100% success
• Believe anyone who says he has a strategy that makes every trade successful
• Trade with a platform which claims to provide 100% profit return

DO:

• Acquire education and knowledge to understand how binary option trading works
• Practice with different strategies and gain valuable experience
• Join reliable online forums and discuss trading issues openly

Trading strategies are targeted to increase the chances of a trader of making profits. It doesn’t mean there will be no trades where the trader will lose his money. There are certain occasions when the trader losses money even when he follows the strategy to the letter. The strategies available online have been created by successful traders who have decades of experience of analyzing and trading on various platforms. It means if you are experienced enough, you can formulate your own strategy according to your skillset and mindset. Such a strategy will be even more beneficial to you, but take that step only when you are absolutely ready for it.

The number of assets available to a binary option trader is immense. But, it doesn’t mean anyone can start trading on any asset right away. There are basically four asset classes:

• Currencies
• Stocks
• Commodities
• Indices

Every trader has the flexibility to make combinations by choosing assets from different classes to increase the profit making chances, as the examples in the first part proved. The only requirement is in-depth knowledge of how the asset generally behaves over time and what factors usually affect its price movements.

Acquiring the required background knowledge and understanding the knock-on strategy basics require time and commitment. The trader can combine this strategy with various hedging strategies to further increase his profit gain.