Archive for October, 2009

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Advantages of Currency Options Trading

Friday, October 30th, 2009

Majority of Forex traders have the opinion that Forex market trading and trading currency options are very similar to each other. Forex traders have this misconception because both these markets involve buying and selling of money. So it is natural for people to believe that both are the same. Owing to this, currency options trading is not that much popular. There are many benefits of currency options trading in Forex market.

The main dissimilarity between the two is that in currency options trading, their values are determined at a specific time period. This is a big advantage unlike the foreign exchange market that operates 24 hours a day, five days a week. At this point, it is important to highlight that currency options trading is the only option trade that operates for 24 hours, which is good news to those who prefer to dabble in this sort of trade.

Therefore, many companies use currency options as a risk reducing option – because a trader will have a tentative idea of how much the trader will profit when it comes to this particular trade. Potential losses too, can be foreseen beforehand. You always have a second chance when it comes to trading currency options – the chance to change your position before the trading actually commences. However, it also means that you will not win every single time just like any other trade – but you still have some acquaintance of what will happen before it actually does. Even with currency options tradingtracking of market conditions. Since currencies change value from high to low very randomly, a great deal of foresight is required from the trader in order to attribute a particular value to your chosen currency.Microsoft, Nasdaq Index, Google Options Also Day Trading on Binary Platform

Trades of this kind are not limited to currency cross rate options however. It is also feasible to buy calls and puts on the direction of movement in major stocks and indices, such as Google and or the Nasdaq index. Making investments in these sorts of high return, short horizon securities used to need large capital amounts just to open options accounts.

Low capital, high yield, high turnover and high reliability day trading system are some of the traits of such trading. These other sorts of stock based binaries are good but the big thing has been the capability to work on currency option trading without the inflated capital requirements and without the high commissions and fees that go with it. I place trades in the market, and at the top of the hour I get my payouts. It is pretty simple when you actually think about it.

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Daily Review 30/10/2009

Friday, October 30th, 2009

USD Dollar (USD)

The Dollar fell against most of its counterparts after better than expected GDP increased investor\’s appetite for risk. The Gross Domestic Product was released at 3.5% vs. the 3.1% expected. Initial Jobless Claims came out slightly worse than expected at 530K. After 4 straight days of drops Wall Street headed for a steep rise after the GDP showed that the U.S. economy expanded at a 3.5% annual pace in the 3Q and fueled stocks. Dow Jones jumped by 2.05% to 9,963 and the NASDAQ rose by 1.84%. Crude oil jumped by 3.19% closing at 79.93$ a barrel as the surprising US economy expansion signaled for a potential increase in oil demand. Gold (XAU) trades at $1,047. Today, Personal Spending is expected at -0.4% vs. 1.3% previously and Employment Cost Index is expected unchanged at 0.4%.

EURO (EUR)

The Euro continued towards its fourth monthly rise against the Dollar as the U.S.’s return to growth renewed optimism a global recovery will quicken, aiding demand for higher-yielding assets. German Unemployment Change came out better than expected at -26K vs. expected 15K. European markets rose more than 1%. Commodities recovered from previous losses and posted important gains. Overall, EUR/USD traded with a low of 1.4682 and with a high of 1.4857. Today, European CPI Index is expected at -0.1% vs. -0.3% previously.

EUR/USD – Last: 1.4830

Resistance

1.4880

1.4925

1.4970

Support

1.4770

1.4720

1.4680

British Pound (GBP)

The Pound climbed against the Dollar for a fourth day after reports showed U.K. mortgage approvals increased more than forecast last month and the U.S. returned to growth in the third quarter. Overall, GBP/USD traded with a low of 1.6337 and with a high of 1.6602. Today, Nationwide Housing Price Index is expected at 0.7% vs. 0.9% previously.

GBP/USD – Last: 1.6560

Resistance

1.6640

1.6700

1.6765

Support

1.6475

1.6410

1.6350

Japanese Yen (JPY)

The Japanese currency fell during the European session and continued its plunge after the release of a government report that showed Japan’s jobless rate unexpectedly dropped for a second month, reducing demand for the relative safety of the Japanese currency. Overall, USD/JPY traded with a low of 90.24 and with a high of 91.60. Today, The Bank of Japan (BOJ) Press Conference is expected. The interest rate is expected unchanged at 0.1%.

USD/JPY-Last: 91.30

Resistance

91.80

92.20

92.30

Support

91.05

90.83

90.50

Canadian dollar (CAD)

The Canadian Dollar climbed from a 3 week low against the Dollar as stocks and commodities rallied after the US GDP report showed the American economy grew in the third quarter for the first time in a year. Overall, USD/CAD traded with a low of 1.0654 and with a high of 1.0820. Today, Canada\’s The Gross Domestic Product (GDP) is expected at 0.1% vs. 0% previously.

USD/CAD – Last: 1.0670

Resistance

1.0750

1.0820

1.0865

Support

1.0630

1.0585

1.0545

Research by http://www.ufxbank.com

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Forex options trading-demystified

Friday, October 30th, 2009

You might have heard people minting money from Forex options trading. People tend to think that it’s just a matter of time and luck. But is that true? Well, a forex options trading is a complex world. Let us understand the secret behind the winning in this business.

When you start trading in forex options, first time, you also will be so confused because of the massive options available out there. Thousand of people will lure you by their “winning system”. Naturally as a “new kid on the block” you will try to find out the “code” to recognize the winning system. The truth is “there is no short cut or code of   winning system exists

But it, does not mean that there is no possible way at all to find a “code of winning”. There are few trading systems, which will help you win in a long span. There may be some minor losing in between, but these systems will help you win ultimately over a period of time.

Lets see what all are they

1)      Don’t wait too long to grab all the profits when the trading points will touch that dream point in forex options trading. Book a decent profit and come out of the trading. The advantage of this system is that you won’t have capital erosion. At the same time, the disadvantage of this system is that, you will not get the high profit if you had stayed invested there when the stocks reached the peak. To cover up the loss, you need to have so many small profits.

2)      Another method is keeping your winning stock till it reached the heights. Never mind the small losses. One big winning can cover up the small losses. Confidence and discipline are the two attributes you needed to adopt this model.

3)      Don’t keep the all the eggs in one basket. You know what I mean- fund diversification. Choose different stocks and adopt different winning systems. By the end of the day you can see a decent profit. You can even decide, by your own experience which system works best for you and you can continue adopting the same.

Remember one thing; don’t switch over between the winning systems too frequently. Find out which system is suitable for you and stick to it.

Most of all, have a self –analysis, whether you have all the qualities to be good trader?

Check out whether you have all these qualities for a forex trading options-The mental strength to face losses and keep on moving, Analytical ability about the situation, confidence, discipline, emotion control over greed and fear.Do you have it you? If you think you have these winning qualities with you, welcome to the world of forex options trading!

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GoLearnForex Daily Technical Analysis

Thursday, October 29th, 2009

AUD/USD:

The AUD continues its recent retrace.  Many traders use different time frames for different currency pairs.  The longer the time frame the more valid the pattern you are charting is.  Moving Averages are basic tool that even the most sophisticated trader needs to always be cognizant of.  The markets tend follow the moving averages generated off of the daily charts.

In Chart below I use a moving average from an 8 hour chart.  I strongly encourage traders to be vigilant of at least checking a weekly, daily, 8 and or 4 hour chart and then any time frame less than 4 hours that you may want to look at.

INSERT CHART

You can see that the yellow line representing the SMA 50 was breeched and prices continued a steady fall (The Red line is the 100 SMA).  There are also a number of near candle formations that support this price depreciation.

Circled in blue is a near Falling Three Candle pattern.  Typically you have a red candle followed by 3 or so small green candles that are contained by the original red candle.  Following the last green candle is another red candle with price closing below the original red.  The Falling Three pattern is nearly followed by Three Black Crows.  This candle pattern forms when you have the candles each open in the midsection of the proceeding candle but also close lower than the proceeding candle.  This pattern nearly forms between the 2 white lines.

GBP/USD:

This pair has been range bound since May.  When a pair trades in a range, price is confined to a narrow margin of highs and lows.  In the Chart below the 2 red lines represent the range support and resistance lines.

The 2 red boxes indicate when minor breakouts have occurred.  The tops and bottoms of the boxes would be your absolute stops depending on the handle you entered the trade at.  Another point of consideration is the 50 SMA and 100 SMA.  You can see that the SMA’s are also moving sideways.  Price typically pops when it passes above/below a significant SMA.  With SMA moving into a sideways march we are approaching congestion on this pair and that should signal another breakout.  Obviously if the dollar continues to strengthen as it has GBP should be headed south.

INSERT CHART

Analysis by http://www.golearnforex.net

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How to Calculate Option Prices in Forex Options

Thursday, October 29th, 2009

If you are involved in the forex options or forex option trading, the premium that a purchaser gives the seller is computed mechanically based on some of the formulas. There are various aspects that have an impact on the option prices as well as the premium rates. The primary difference is between the striking prices and the market prices. It would be considered while calculating the premium that needs to be paid. The more is the difference amongst the striking prices and spot prices; the lower is the option rates. This is so because of the lower probabilities of hitting the striking price.

Another factor is the time period at the commencement of the contract till its expiry date. The more is the lifespan of the option, the more is the expense of the premium to be paid to the seller by the purchaser. This is so as the value of an option reduces as the expiry date of contract comes near. The option becomes worthless after the expiry date and hence they are also referred to as wasting assets or the assets that decay in their worth as time passes.

Third aspect is the unpredictable nature of the forex market. This is indeed the most significant factor of all the others in the forex option. If the instability is at its higher, the seller does take a big risk and the purchaser pays a big premium amount just to cover that risk amount. If the instability is low, then in such a case, the seller undertakes less risk and the purchaser pays less amount of the premium.

Forex option trading has gained a lot of popularity from the year 2004. A number of people are investing their sum in this type of business venture, however all of them do not return back home with a great smile on their face. The reason for it is that most of the traders do not use any kind of forex option approach and this gradually makes them risk takers and forex gamblers.

Nowadays, there are a number of forex option approaches available to you to select from. The very frequent of these is the common sense option approach. All you require in this type of approach is the ability to write, read and perform simple maths. Using these basic skills, you would be able to carry out simple calculations just to decide the profit or loss curve. Once you are successful in determining the curve, you will then have the data regarding when the option is at its lowest or highest, as such. Another very popular approach for the option traders is the hedging approach used successively by the forex traders.

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Daily Review

Thursday, October 29th, 2009

USD Dollar (USD)

The Dollar rose across the board. A rise in risk aversion following an unexpectedly drop in New Home Sales sent stocks lower worldwide. The Dow Jones fell for the 4th consecutive session and ended at 9,763.The Standard & Poor’s 500 Index dropped 2% on concern a rally in equities this year outpaced the prospects for economic growth. New-home sales unexpectedly fell last month to an annual rate of 402K, from a revised 417K pace in August. Crude oil fell from $79 a barrel to $77.20 on stronger Dollar. Gold (XAU) continues to move away from the highs of the year and fell to test levels below $1,030 an ounce. Today, The Gross Domestic Product (GDP) is expected at 3.1% vs. -0.7% previously. The Initial Jobless Claims are expected at 520K vs. 531K previously.

EURO (EUR)

The Euro kept weakening versus the Dollar for the 4th day in a row. The currency slumped against Dollar and Yen, reaching a 2 week low against both safe havens. The German Consumer Price Index (CPI) came out as expected at 0.1%. Overall, EUR/USD traded with a low of 1.4690 and with a high of 1.4840. Today, The German Unemployment Change is expected with 15K vs. -12K previously. The German Unemployment Rate is expected at 8.3% vs. 8.2% previously.

EUR/USD – Last: 1.4700

Resistance

1.48

1.4842

1.489

Support

1.471

1.4675

1.465

British Pound (GBP)

The Pound failed to hold above 1.6400 versus the Dollar finding support only at 1.6360 following economic data in the U.S and Dollar\’s strength. GBP/USD peaked at the highest price for the current week but it was unable to hold versus the strengthening Dollar. Overall, GBP/USD traded with a low of 1.6285 and with a high of 1.6466. Today, Net Lending to individuals is expected unchanged at 0.7B. The Mortgage Approvals also expected unchanged at 52K.

GBP/USD – Last: 1.6368

Resistance

1.651

1.6575

1.6640

Support

1.6355

1.6285

1.6240

Japanese Yen (JPY)

The Yen rose sharply versus most majors as weak economic data sent world stocks lower fueling risk aversion. The Yen reached the highest in 2 weeks against the Euro amid signs the global economic recovery is losing steam, damping demand for higher-yielding assets. Industrial Production came out 1.4%better than 1.1% expected. Overall, USD/JPY traded with a low of 90.54 and with a high of 91.80. Today, Household Spending is expected lower with 1.2% versus 2.6% and Tokyo Core CPI is expected with -2.0% versus -2.1% prior.

USD/JPY-Last: 90.42

Resistance

91.3

91.75

92.1

Support

90.5

90.1

89.9

Canadian dollar (CAD)

Canada’s currency depreciated against its U.S. counterpart to the lowest level in more than three weeks as declines in crude oil, the nation’s largest export, and stocks damped demand for higher-yielding assets. Overall, USDCAD traded with a low of 1.0636 and with a high of 1.0810. Today, The Raw Materials Price Index (RMPI) is expected at 1% vs. 3.7% previously.

CAD/USD – Last: 1.0790

Resistance

1.08

1.0855

1.0898

Support

1.068

1.063

1.0587

Research by http://www.ufxbank.com

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Forex Option Trading – The Precautionary Measures

Thursday, October 29th, 2009

It is necessary to get a grip over the working of the foreign exchange market industry as well as the Forex option trading. Its an arrangement that enables the holder to buy and sell a currency during a span of time though he is not obligated to do so.

Call options and put options are the two types of Forex options available. Call options allows holder to buy the currency whereas the put option gives him the right to sell the currency. The foreign exchange rates are never stable so other options are also available to curtail the losses. These are being used by businesses all over the world.

There are a number of risk factors we have to take into account. So before investing in the stock exchange you should be aware of the threats involved:

1. Forex market trading is a vast arena of business where there are uncertainties. So there are every chances of huge losses as there are fluctuations and packed with ambivalence.

2. In the process of waiting for the filling of vacancies of charts in internet to fill up, traders often lose investment. And in the Forex market, it can easily be overlooked. The items may rise or fall dramatically.

3. Forex option trading can be compared to online casinos. It is addictive in nature. And similar to casinos the risk of addiction is high amongst investors or traders. The fact that it is open 24 hours a day increases chances of addiction.

These three significant things do make you ponder as forex trading systems can often give you depressing results. This is so because a great deal of expectations and hard work are put in.

So to brave these dangers and to combat them skilfully here are a set of tips that may help in safer fund management in Forex trading.

1. Always depend on time tested and tried methods that have really worked for investors before in scaling their career before. Of course you have to take note of the previous statistical tests that have been supplied. At the same time you should study the market survey properly.

2. It is clever to invest in a small amount of money. If you start off in the beginning itself with a large amount of money you are sure to suffer a huge loss. Whereas if by chance you lose and the amount you put in was minimal you will be at lesser risk of losing good money.

3. Only when you are sure that the strategy you are about to apply is full proof do go for it. Chuck all other dubious promises and schemes that come your way until you are sure of their qualities and power. Or else ignore them. You can always wait for the right and ripe to appear before taking the big leap. It is not necessary to be trading always. First be sure about all you apply.

4. Make yourself knowledgeable throughout the course of your business and training. The knowledge can be in your favour or against you too, it is important to know them. Always be on the outlook for something new and more useful that can be applied. Study all the possibilities that can come in your way of success. Then try to solve them carefully.

Forex option trading like any business is a sheer and careful balance of ready wit, luck and also some real timing. You may be the luckiest one out there if you have the correct proportion of all these!

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GoLearnForex Daily Technical Analysis

Wednesday, October 28th, 2009

USD/CAD:

We have noted several times a formation we refer to as a Step pattern.  More commonly this is identified by Lower Lows and Lower Highs and vice versa.  We picked up on this pattern emerging on a 4 hours chart.  We identified the possible start of this pattern shortly after the BOC  publicly declared it’s sentiment for a “weak Canadian Dollar”.  We assured you that there would still be time to catch this move even if you could not trade the actual news.

We suggested that you wait for the Step to appear and buy on the dip which was a confirmation of our pattern formation. On the graph that it is depicted near the 3 and a yellow circle. The exit for taking PNL we had at 1.0660 a prior support resistance point.

INSERT GRAPH

EUR/USD:

The Squeeze Play.  We talked about this move where we are seemingly forced into a breakout.  In one of our earlier pieces we mentioned that our experience told us not to bet on the Squeeze Play, meaning trade against the direction of the existing trend.  I must admit we got carried away by the hoopla of crossing 1.50.

So the question you all should pose” is why in this case do you bet against the trend when one of the number one rules of technicians is never bet against the trend”.  The answer is based on the number two rule of technicians and that is; trade for the outcome that has the highest statistical probability of occurring.  To explain this further lets pose a question.  Why didn’t the market make this move a while ago similar to the recent strong moves in CHF  & AUD?

INSERT CHART

The answer is the Strength of the move was deteriorating in advance of 1.50.  Every trader had their   eye on  1.50, but obviously no one was a real bu

yer (for now) otherwise at 1.4830 when momentum started to stall we would have had traders continuing to bid up the EUR.  Lastly, when price action was negligible on the big cross of 1.50 that should have been another tip that there were no big orders lined up to continue buying north of 1.50.

We added  a MACD to indicate when the momentum started to wane. There are number of overbought tools on your platforms that you can use, from Stochastics and Oscillators to something as simple as the RSI.

Analysis by http://www.golearnforex.net

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Daily Review

Wednesday, October 28th, 2009

USD Dollar (USD)

The Dollar strengthen during yesterday trading session as Confidence among U.S. consumers unexpectedly fell in October for a second month. The Conference Board’s confidence index dropped to 47.7 from a revised 53.4 in September. NASDAQ decreased by 1.2% and Dow Jones slightly rose by 0.14%. Crude oil rose by 1% closing at 79.55$ a barrel after a volatile trading session as investors wait for the oil inventories today. Gold (XAU) weakened by 0.7% closed at 1035.4$ an ounce. Today, Core Durable Goods Orders are expected at 0.6% vs. -0.3% prior, New Home Sales are expected to rise from 429K to 443K.

EURO (EUR)

The Euro weakened versus the Dollar for the third day in a row on concern a rally in stocks and commodities can’t be sustained. M3 Money Supply came out worse than expected at 1.8% vs. 2.1% forecast. Overall, EUR/USD traded with a low of 1.4770 and with a high of 1.4926. Today, German Prelim CPI is expected at 0.1% vs.-0.4% previously.

EUR/USD – Last: 1.4811

Resistance

1.4824

1.4927

1.5046

Support

1.4770

British Pound (GBP)

The Pound strengthened against the Dollar after the Confederation of British Industry\’s distributive trade\’s survey reported sales balance rose to +8 in October from +3 in September, better than economists\’ forecasts of a rise to +5. This is the fastest pace of growth since December 2007. Overall, GBP/USD traded with a low of 1.6285 and with a high of 1.6438. No economic data expected today.

GBP/USD – Last: 1.6358

Resistance

1.6438

1.6636

1.6693

Support

1.6286

1.6250

Japanese Yen (JPY)

The Yen rose against the Dollar for the first time in 6 days as a plunge in Treasury yields after the record $44 billion auction in two-year notes made the Dollar less attractive to Japanese investors. USD/JPY traded with a low of 91.70 and with a high of 92.32. Retail sales came out at -1.4% vs. -1.5% forecast. No economic data expected today.

USD/JPY-Last: 91.18

Resistance

91.57

92.19

92.32

Support

90.77

90.48

Canadian dollar (CAD)

The Canadian Dollar appreciated from a three-week low, gaining for the first time in four days amid speculation its decline was too big to be sustained after it reached a key technical level. Overall, USDCAD traded with a low of 1.0626 and with a high of 1.0716. Today, BOC Gov Carney Speaks.

USD/CAD – Last: 1.0664

Resistance

1.0696

1.0717

Support

1.0630

1.0500

1.0450

Research by http://www.ufxbank.com

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Currency Options Trading – 2 Influential Option Strategies

Wednesday, October 28th, 2009

If the Forex traders use the currency trading options if used correctly, can give you two great advantages that is sure to lead you to long term trading success. This article will explain the influential option strategies that should be practiced. This will also teach you at how to buy options correctly and take advantage of restricted risk and unlimited gains and how to sell options and get odds of maximum success in your favor.

1. Option Buying For Big Gains – The Forex traders buying an option gains a huge advantage and that’s staying power. The trader does not have to worry about price swing against you in the short term, so long as your option trades in the money at expiry the trader will win. The trader will have unlimited profit potential and strictly limited risk which is the premium he have paid for the option in his Forex business.

Most traders constantly get stopped out by price swings in Forex business against them in the short term and they buy options that allow them to ride out these swings. There are two golden rules you should keep in mind when buying options. The first strategy is to buy at or in the money options only and to have plenty of time to expiry. Of course what most Forex traders do is go for cheaper options a long way from the price and do not buy far enough forward. In betting terms these are long shots and you will definitely lose, as the odds are not in your favor at all. Majority of the options expire worthless so you will need to do what most option traders do not do. You need to buy time and that exactly means close or in the money options and if you have a profitable Forex trading strategy and do this, you can make abundance of money with currency options trading.

2. Selling Options for Big Gains – How can be the experience of Forex trading with odds of 90% in your favor, of course you would and you can by selling options. The option buyer of course has limitless gains and limited losses and 90% chance of failure. The seller on the other hand, has a 90% chance of success, and also unlimited risk and a limited gain. The key here is that you have huge odds on your side and while the gains may be limited they will add up, unlimited risk that simply requires a spread of options and good money management.

The Option sellers in Forex market do the reverse of what a buyer does. You can sell options, with little time to expiry to get time decay on your favor and you sell out of the money options as the odds come in your favor. Option sellers require a good account size and you should be spreading your risk but with majority of odds on your side that options expire valueless and using the above tips to make even more money, you can also build long term gains with the odds strongly on your side. Currency options trader’s in Forex suits all traders novices will feel the comfort of limited risk and buying time and the well capitalized serious trader will love the great odds he gets selling options. Consider the above rules in depth and you will find options are a far better tool to lead you to long term currency trading success.

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