Forex Options - Solve a Major Problem for Novice Forex Traders

By: Sacha Tarkovsky

A major problem that all FOREX traders face and novice traders in particular is - dealing with short term volatility, which stops them out to soon.

They get trade direction right, get stopped out and then see the currency trend the way they had thought making thousands of dollars and their not in!

FOREX options if used correctly solve this problem.

FOREX options give you unlimited profit potential with limited risk and you only risk what you pay for the premium.

You can read about the basics of options on the internet, here we want to go through some simple ways of making money buying options.

Rules!

Here are some rules that will help you make money:

Rule Number 1

Don't buy out of the money options a long way from the strike price.

Many traders do this but the odds of the option making money are less, the profits are more if your price is hit or exceeded but "if" is the important variable.

The best way is to buy options that are at or in the money.

Rule Number 2

Make sure you buy options with plenty of time to expiry, at least a month and preferably 2 or 3

As an option comes to expiry time value will kill it.

If you follow the two rules above you will dramatically increase your chances of success.

Get the odds in your favor

Options which are a long away from the current market price and with little time value are cheap, but their cheap for a reason - The odds are firmly against you.

If you use the above simple rules you can ride out short term volatility, with pre-defined risk and stay with the big trends longer.

Most people don't do the above, but its really common sense and if you do it, you will get peace of mind in terms of risk and be able to lock in to some nice trends.

FOREX options are a great tool for novice and professional traders, incorporate them in your trading and see what a great profit tool they are.

Foreign Exchange
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