Twelfth session of Forex Training
Welcome back to Forex professional training in financial markets.
As we discussed in the previous sessions, there are 4 different types of trade: Spot, Future, Option and Forward.
Now let’s talk about option trades; in these contracts a party can choose the symbol and time of the transaction.
The difference between this type and future trades is that in future trades, a party cannot choose the time of the trade as they have been chosen before.
However, this is not an issue in option contracts, as time of the trade can be changed at any moment by the parties. Hence why, if you remember, this type is more expensive than future contracts.
In the past there were few brokerages who offered this type of trade but over the past 2 to 3 years it’s become more and more accessible, as more brokers have started offering these services to their customers.
There are also some brokers who are specifically designed to deal with option trades.
It is important to note that in Forex, option is not gambling.
It is worth mentioning that there are number of brokerages which offer option, like FXGlory.
There is also some extra information about 24option, which we will look at in the future sessions.
This site is 24OPTIONS, which is very reputable in this business and has the most complete platform.
You should know that all Option providers represent web based trading platforms on their websites that differ from MetaTrader platforms, thus you can avoid downloading any software from the Internet to access your trading account.
As you can see 24option is regulated by CySEC, which is connected to Cyprus and the European Union.
Advantages of Options Trades
Now it is time to look at the advantages of Forex option.
- You are not dependent on Pips. This means that in a normal market, in order for a party to make a profit, they need market movements; but in option, with just a bit of change in the market trend you can make a profit.
- It does not include spread, which means the asking price and the selling price are equal and you only have to pay the commission. Most traders usually wait when they are experiencing losses and sell quickly when they make profit.
- When you make a trade in option, it instantly registers it with no delays.
- There is a limit to your gains and losses here, and both are very clear to a party at the time of a trade.
- Since there is no PIP involved in option trades, when the market is experiencing a dramatic fluctuation, parties do not lose more than a premium invested in that contract.
- The ability to use what we call a Break Out. This means that when the market collapses, traders know that it will start moving up again, so they use the Break Out to gain every possible amount of profit that can be considerably higher than a loss. Also there are some tools and features that can help traders to detect lucrative spots and fluctuations such as indicators and oscillators.
- You are also able to use methods such as Candlesticks, Amazing or News. In Forex market traders cannot open a trade around news time in which leverage is considerably reduced by brokers and re-quote orders are presented, while this is not the case in Option markets. Thus traders can easily place orders even when key news are about to be announced.
That concludes this session, until next time and another session take care.