Tuesday, October 26, 2010

Currency Options Trading

One big advantage of currency options trading is that you can trade the market both ways. You can not only profit from up trend of the market, you can also profit from the market when it is going down trend. Together with the high leverage of your account, you can be earning quite a bit.
Why is the risk smaller in currency options trading?
Currency options trading do not need you to pay more than the premium amount you initially paid for. If the market moves more than what you had paid, you will just lose your premium and nothing more. But if market is going to your favor, you will be making some nice cash.
What are the advantages of regular forex trading to currency options trading?
They are all trading on currencies, so what are the differences between them? In normal forex trading where the market is moving against your favor, you will keep on losing your money until you hit a stop loss level that you set. If you did not set any, then you could wipe out your account easily. For currency options trading, you will be paying a premium initially. If cases where the market is moving against your odds, you will just be losing the premium you paid. If the market is moving in your favor, your chance of profiting is unlimited for as long as the market can go.
Trend break outs
Many people trading in the forex are using this method to trade. The strategy of using trend break outs is simple. You will have to catch a break out of a trending market. When the market is not moving much, be it trending or moving sideways, you are looking for the breakout. Once to start of a break out occurs, you will catch it and ride the profit. The longer the still periods, the stronger and larger the movement of the break out once it happens.
What are the commissions?
Currency options trading have less liquidity then normal forex trading. So the spreads could be higher. That is the reason why options trading are more suitable from mid-term to long-term traders.

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1 comment:

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