Forex Option Trading - Fixed Prices to Shield a Trading Account

By Steve Maenshel

Forex option trading is often used by large financial institutions for their hedging strategy implementation, as well as it is used by a large number of day traders as a speculative instrument. Forex options are a specific type of a trading instrument, which has its upsides and downsides. One of the special features of Forex option trading is that it's extremely liquid. Forex option buyer is called a holder, while Forex option seller is called the granter.

The forex option holder receives the right to exchange a predefined amount of currency at a predefined date and price. The option buyer is obligated to pay a premium to the seller of the option. In fact, this is the only liability of the buyer, making Forex option trading a field with very limited liabilities. The forex option seller has two ways to precede with his/her option - to buy the contract back or to hold it until its expiration.

When you buy a Forex option, you are opting for a fixed price of the transaction. Forex options have a fixed amount with a fixed expiration date, rather than being tied to the markets' fluctuations.

Forex options may be exercised or not exercised. Actually, most often options in Forex option trading are not exercised by the buyer, and are offset before their expiration date. In case the option does get exercised, the option holder is assigned a spot position. An option may also expire and become worthless, if by the time of its expiration the strike price is out-of-the-money.

As mentioned before, options in Forex option trading have a fixed price. This special feature shields you from losing all of your capital with a particularly unfavorable market move. You will profit when the strike price is higher than your initial purchase price, and you will incur a loss when its lower.

Forex option trading can only be applied on the international markets, since it's a hedging instrument. Forex option trading is generally considered very risky, but also with higher potential of profits.

There are two types of options in Forex option trading- call options and put options. Call options give the right to buy currency, and put options give the right to sell currency. Both these options generally change in respond to the change in volatility, i.e. if the volatility falls, the prices of both options also fall. There are common and customized Forex options, respectively called "plain vanilla" and exotic.

Are there any ways to make your Forex option trading less risky? Yes, for that try to follow the below general guidelines:

1. Do not place a large chunk of your total capital into Forex option trading.

2. Do not try to trade at all times. It is better to patiently wait for the proven signals.

3. Trade on a Forex option trading demo account prior starting to trade live.

Forex option trading is a good way to learn and understand more about the Forex market. Forex option trading is a risky but also potentially very profitable Forex trading instrument. - 23218

About the Author:

Author Steve Maenshel can you develop a solid foundation for forex option trading. For more forex trading information, visit his forex resource center.

Introduction to Independent Broker Dealers

By Rick Klaubert

A lot of people who give you advice on what to buy and what not to buy are the brokers who sit near your place where you live. Now these brokers will generally execute your trades via some broker dealers. These dealers can be big companies which are well known in the industry.

The other part of the industry has the dealers that are independent and are not attached to any big firm. The advantage of these firms is that they are unaffiliated and hence will give you sound advice and as these are not very big the service is very personal. A lot of investment advisers prefer the independence of broker dealers.

Since these are independent firms they need to route trades through some other firms so technology is a must. So select a brokerage firm with good technological capabilities.

Before you register with an independent broker make sure that check with your fellow brokers as to which is a good broker dealer. Some broker dealers companies have been known to arm twist their investment advisers into doing a lot of unethical practices.

You can refer to the independent broker dealer association for background checks about a particular company. As an investment adviser it is in your best interests as well as your clients that you check the broker dealer rankings for the year before making the decision. Each year the reputed trade magazines will come out the broker dealer rankings and these rankings will help make your decision easy.

That said you can go with the affiliated broker dealers too but the fact is that in some ways they may be better with all access to a lot of special information which most of the independent broker dealers may not possess. The choice has to be made by you in the end. - 23218

About the Author:

The author writes about independent broker dealers for cheapest online trading

Psychology Of Risk Control

By Ahmad Hassam

Many new currency traders just dont know and understand the fact that risk analysis and money management is important in currency trading. Many think, Why money management has to be so boring and not sexy, when they hear the word money management. Its just this kind of behavior that gets average novice trader into trouble. Why money management is so boring?

Most of the novice traders do in fact think that the currency market will do exactly what they want it to do and they will end up with a trade that can make them a lot of money. Getting into a trade is thrill enough in itself at first glance. Everyone wants to make money and a lot of money. You seduce yourself into thinking that once you enter the trade, it will be honky dory.

Then all of a sudden it seems that the market is not at all cooperating. For some reason or another, market is not complying with the plan of making a lot of quick cash and is not going in the desired direction. Instead, it is going in the wrong direction.

The gut feeling was so clear and compelling when you had entered the trade. It was a sure thing at that time. The trade couldnt go wrong in your opinion. Now it has gone so far in the wrong direction that you may have difficulty in getting out.

Do you know now that most of this evolution of a position gone bad has to do with you entering the market and risking real cash without having a plan, a stop and a tested money management system before entry. What to do now?

Now many of us have faced this type of a situation. Most of us do not think it painful enough to change our thinking and take sound money management seriously until we suffer a few losing trades to bring the concept home.

What is the psychology of risk control? The psychology of risk control sooner or later begins with genuinely believing that you will benefit from a risk control plan. When you have mastered your psychology, you will experience less anxiety in your trading and will be able to implement your trading plan more consistently.

You will reduce your level of stress and anxiety during trading by limiting your loss potential on each and every trade. Never ever risk more than 2% of your equity on a single trade. So the most you will lose on a single trade will be $200 if you have a $10,000 trading account. Think of it as getting a step closer to the winning trade instead of fearing a stop out when your trading system tells you that the trade has gone bad.

Your pride will increase from generating greater profits from each trade. You will begin to see the profits increase as you gain confidence in your money management plan. That increased pride will make you more confident in your abilities to become a successful trader. - 23218

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading stocks and currencies. Develop your own Forex Trading System. Get Netpicks Forex Signals Free!

Forex Trading Strategies - Sound Strategies Remain Useful for Decades

By Steve Maenshel

Forex trading strategies are essential for a trader to know exactly when to sell or buy a currency pair. The time of purchase or sale of foreign currency pairs is the most important point of a trade. The better that the trader is able to determine the time of entry / exit, the more profitable is a potential transaction. This can be achieved with sound Forex trading strategies.

Forex trading strategies in combination with technical analysis is usually used, especially to determine the time of entry / exit. Most often, a decision is made within seconds or hours.

Key Forex trading strategies:

1. Using Support and Resistance levels

Forex trading strategies include tracking the Support and Resistance levels. Break of the Resistance can become a signal for opening a long position (Buy), which can then be protected by a stop-loss order. You can place the stop-loss a little under the level of a break, which will now become the level of Support. Prices ascending up to the Resistance in a generally declining trend, as well as prices declining to the Support with a generally ascending trend can be an indication to open new positions.

2. Scanning for the intersection of trend-lines

Most important is the intersection of a proven and several times checked trend-line, which would allow a trader to enter / exit early. At the same time, it is better to also keep an eye on other technical indicators. If you are using the trend-line as your Support / Resistance, buy when prices fall to a solid upward trend line and sell when prices rise to a solid downward trend-line. This is one of the sound Forex trading strategies.

3. Scanning the breaks

Three Forex trading strategies for trade at the time of breaks:

- Open a position in advance, in the anticipation of a break;

- Manage to enter the market at the moment of the break;

- Wait until the rollback, which is almost inevitable after a break.

You can additionally use a combination of the above Forex trading strategies, and try to open a position in each of these phases, i.e. before a break, after the break and during a correction, which is likely to follow a break.

4. Trading time frames

1). Holding a long position- for days or months - (is a moderately safe one of the Forex trading strategies, based on time-frames). It is best suited for strong trends. For best results, also look at the immediate options. Since this is a long position, you should also use fundamental analysis.

2). Forex trading strategies, based on medium-long positions, i.e., few days. Also analyze short-term scales. Such positions are likely the most stable for profit, but their analysis is a bit trickier. Look, as usual, for the best time for the opening / closing positions. Again, use in addition to technical analysis also the fundamental analysis, which is perfectly suited for longer timescales.

3). Short-term positions, lasting from several minutes to several hours. Pluses: there is no risk of fundamental news and the changes in prices at the time of your absence. Disadvantages: high risk of adverse movements in prices requires constant monitoring and concentration throughout the day. Basically, if a trader uses the data on a number of sellers and buyers in the market, that data will give the trader the needed information about where the market seems to go. Super-short-term trading could also be used with breaks and rollbacks. Super-short-term trading is highly risky, and thus it better suits professional traders and market-makers. This is the least safe Forex trading strategies.

Forex trading strategies are essential to find the exit / entry points. Try to constantly enrich your trading arsenal with sound Forex trading strategies - 23218

About the Author:

About the author: Steve Maenshel has been a professional trader for ten years. He can help you understand forex trading strategies. For more forex trading information, visit his forex resource center.

The Key To Making Money In Forex Trading

By Steve Halladay

If you're reading this article, then you've probably already started dabbling in forex trading, or you're thinking about starting. No matter which category you fall into, this article has some information that could help you.

First off, let's quickly touch on what forex trading is. It is the trading of currencies in order to make a profit. In order to make money you need to be able to accurately predict fluctuations in various currencies in order to know when to buy and when to sell. It's a lot of fun, but it also be a big challenge to learn how to trade successfully!

There's a lot of information available in bookstores and online that can tell you a lot about forex trading, but there's so much that it can be easy to get overloaded. It's possible to spend months or even years reading about all the different strategies that have worked for other people. Unfortunately, working strategies are changing constantly with the markets. that means that something you read about today could be extremely out of date. That makes it hard to keep up with the latest strategies.

Don't want to make forex trading your full time career? Let someone else do most of the work for you, and you'll still make a significant second income if you do things right. Trust the experts and look to their experience and knowledge about the markets.

The easiest way to do this is to use what is known as a "forex robot". This is a piece of computer software that automatically collects market data in realtime. It has been programmed by top trading professionals in order to be able to spot signals and identify profitable trades. As an example, it can identify when to purchase the Japanese Yen and then when to sell it in order to capture a profit.

Many people start out skeptical, and there's a good reason for it. After all, most of us are wary about putting our trust in a computer program. There are lots of proven programs out there, with track records that speak for themselves, however. Just look for a few important features when you choose your software.

First, don't believe that just because a program is expensive, it's definitely better. There are programs out there that cost thousands of dollars and just don't work, and there are reliable pieces of software that cost only around a hundred dollars, but are guaranteed to make you a profit.

When it comes to guarantees, make sure your forex software has one. Programs that work are made by companies that are willing to back them up. The guarantee should be for a minimum of thirty days, and more time is better.

There should also be a demo account included, allowing you to trade live without really interacting the the markets and risking your money. This allows you to work out the program and see whether it's really effective without investing. Once you know your program is effective, it's time to start making money!

Forex trading is one excellent way to earn a little extra money, as long as you do it correctly. Not sure about things? Don't be afraid to ask! - 23218

About the Author:

Click Here to discover more about making money by trading forex. You can discover to trade forex and look at reviews about forex trading programs and software.