All about trading in the forex

All about trading in the forex

All about trading in the forex

Most traders would say forex trading was equal to aggressive speculation. Traders often discover that they need the ability of the forex retail trader to trade options on the currency pairs. The advantage of using OTC options is that it can give you more strategies and tactics.

Here you can see an active trader buying calls or puts on the underlying spot currency pair. The payout in this case is limited. However, options on spot forex pairs can be used as a method for generating income in your forex account as well. There are ways to minimize risk in the forex. It is important to understand the steps in formulating an income strategy for a forex account using options. Formulate income goals is the first step. At the same time the main objective here will need for you to have an achievable dollar goal. Most people will want to set a $1,000 per month on a $5,000 account which is a different level of risk than setting a goal of $500 per month.

The next step is to make some risk controls and trade management. It is always best to have a process to minimize risk. It is always good to use some Stop and limit orders in order to do away with risk. There are plenty of other risk control strategies like buying and selling spot cash to offset price moves can be applied. One good advice is to take measures to control the downside of this tactic.

Technical analysis is also something you want to use In trading you need to understand how the strike prices relate to overall key indicators, trends, and support and resistance levels. It is best that the trade be an outcome of technical analysis. Of particular importance in evaluating strike levels are Fibonacci levels, point and figure breakout zones, as well as the valuations on the delta, theta and other key terms related to options trading.

Once you have planned out all the monetary goals you can now scan option pricing tables for puts and calls that can help you achieve those goals. Cyberspace offers plenty of 24 hour OTC currency option pricing tables. There is this one incident when in looking to generate income using EUR USD options, they chose a February 98.50 put and a February 110.05 call where the spot price at the time of the trade was at 104.69.

You will notice the margin ratio is 80% which is quite high. It is best to have buy stops if your account is a $5,000 account.

Your objective is that when the February options expire, the cash price of EURUSD will be between 98.50 and 110.05. Just like a 400 pip wide trading range this is one example of the income trading you can have.

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