Synthetic Long Strategy
Reverse your risk factor with the Synthetic Long Strategy
Use this strategy to offset your losses and balance your account.
While this strategy requires more knowledge about the markets I feel that the payoff in the long run makes the extra time spent learning about the way the financial markets work worth it. You will have to look at the market and the asset you want to trade on and make a guess whether the market is bullish or bearish. You can do this by looking at the market sentiment. Market sentiment is the dominant feelings of investors as to the direction of the price movement.
I have found that the best conditions for this strategy to work are in a bullish market. This is when the market sees a big move upwards in prices of assets. You will then have to make two simultaneous positions in opposite directions in order to maximize your profits.
You will make an out of the money call option and an out of a money put option at the same time so they will have the same conditions.
In the end you will see that as the price goes up the call option will be more profitable and the put option will not be worth as much. If you use this strategy successfully you will see, as I have, that your profits from your winning trade offsets the losses on your losing trade.