Forex Options Trading - How to win with Forex Options

The Foreign Exchange market, it is the most profitable, the premier, the largest and the leading financial market in the world. Millions of people trade in this market through the internet every day, generating as much as two trillion dollars of trade daily on average. But the sad truth is that not everyone is able to take advantage of the opportunities presented by the Foreign Exchange market. More than 95% of all traders lose their money, 4% are able to generate profits and only 1% of all traders are able to make a killing. With those kinds of odds, how can you win?

There are always more than one way to crack an egg, and same thing with the Foreign Exchange market, there are more ways to make a profit in here. An alternative method is by using forex options. There are two types of forex options in this market, the first is the traditional.

Traditional option basically gives you control over certain amount of currency. By paying the contract price, you reserve the right to purchase them but not the obligation to do so. Thus, you risk less money but you receive control over it.

The second type of forex options is the SPOT or Single Payment Options Trading. Here, you will input a scenario you predict. After which you will receive a premium quote; if the scenario takes place , then you will automatically payment.

The advantage of forex options is that it involves less risk. You do not need to put in a lot of money to get good opportunities.

Dark Cloud Cover

Dark Cloud Cover is a bearish candlestick reversal pattern, similar to the Bearish Engulfing Pattern (see: Bearish Engulfing Pattern). There are two components of a Dark Cloud Cover formation:

Bullish Candle (Day 1)
Bearish Candle (Day 2)

A Dark Cloud Cover Pattern occurs when a bearish candle on Day 2 closes below the middle of Day 1's candle.

In addition, price gaps up on Day 2 only to fill the gap (see: Gaps) and close significantly into the gains made by Day 1's bullish candlestick.


The rejection of the gap up is a bearish sign in and of itself, but the retracement into the gains of the previous day's gains adds even more bearish sentiment. Bulls are unable to hold prices higher, demand is unable to keep up with the building supply.





Dark Cloud Cover Candlestick Chart Example
The chart below of Boeing (BA) stock illustrates an example of the Dark Cloud Cover Pattern:

Dark Cloud Cover Sell Signal

Traders usually suggest not selling exactly when one sees the Dark Cloud Cover Pattern (Day 1 & Day 2) until other confirming signals are given such as a break of an upward trendline or other technical indicators. One reason for waiting for confirmation is that the Dark Cloud Cover Pattern is a bearish pattern, but not as bearish as it could be: part of the gains from Day 1 have still been preserved.

A more bearish reversal pattern is the Bearish Engulfing Pattern (see: Bearish Engulfing Pattern) that completely rejects the gains of Day 1 and usually closes below the lows of Day 1.

Also of interest, the bullish equivalent of the Dark Cloud Cover Pattern is the Piercing Pattern.

Bullish Engulfing Pattern

Intra-day Bullish Engulfing Pattern
The following 15-minute chart of the S&P 500 exchange traded fund (SPY) is of the 2-day period comprising the Bullish Engulfing Pattern example on the prior page:


Day 1: As is seen in the chart above, Day 1 was a down day, even closing the day at the low (bearish sentiment).

Day 2: The open was a gap down, very bearish sign; but the bulls appeared to have had enough because the price of the SPY's

went up the rest of the day, closing near the day's highs (bullish sentiment) and higher than Day 1's high. The Bullish Engulfing Pattern is one of the strongest candlestick reversal patterns. Its opposite is the Bearish Engulfing Pattern (see: Bearish Engulfing Pattern).

Bullish Engulfing Pattern

The Bullish Engulfing Candlestick Pattern is a bullish reversal pattern, usually occuring at the bottom of a downtrend. The pattern consists of two Candlesticks:

Smaller Bearish Candle (Day 1)
Larger Bullish Candle (Day 2)

The bearish candle real body of Day 1 is usually contained within the real body of the bullish candle of Day 2.

On Day 2, the market gaps down; however, the bears do not get very far before bulls take over and push prices higher, filling in the gap down from the morning's open and pushing prices past the previous day's open.

The power of the Bullish Engulfing Pattern comes from the incredible change of sentiment from a bearish gap down in the morning, to a large bullish real body candle that closes at the highs of the day. Bears have overstayed their welcome and bulls have taken control of the market.


The chart below of the S&P 500 Depository Receipts Exchange Traded Fund (SPY) shows an example of a Bullish Engulfing Pattern occuring at the end of a downtrend:

Bullish Engulfing Buy Signal

There are three main times to buy using the Bullish Engulfing Pattern; the buy signals that are presented below are ordered from the most aggressive to most conservative:

Buy at the close of Day 2 when prices rallied upwards from the gap down in the morning. A strong indication that the rally on Day 2 was significant and truly a reversal of market sentiment, is if there was a substantial increase in volume that accompanied the large move upward in price (see: Volume).

Buy on the day after the Bullish Engulfing Pattern occurs; by waiting until the next day to buy, a trader is making sure that the bullish reversal and enthusiasm of the prior day is continuing and was not just a one day occurance like a short covering rally. In the chart above of the SPY's, a trader would likely not enter the market long on the day after the Bullish Engulfing Pattern because the market gapped down significantly and even made new lows. A trader using methodology #2, would likely wait for a more concrete buy signals such as the one presented in method #3 next.

After a trader sees the Bullish Engulfing Pattern, the trader would wait for another signal, mainly a price break above the downward resistance line (see: Support & Resistance), before entering a buy order.
An example of what usually occurs intra-day during a Bullish Engulfing Pattern is presented on the next page.


Next Post - Intra-day Bullish

Candlestick Basics

Candlestick charts are an effective way of visualizing price movements. There are two basic candlesticks:

Bullish Candle: When the close is higher than the open (usually green or white)
Bearish Candle: When the close is lower than the open (usually red or black)

Candlestick Parts
There are three main parts to a candlestick:

Upper Shadow: The vertical line between the high of the day and the close (bullish candle) or open (bearish candle)

Real Body: The difference between the open and close; colored portion of the candlestick

Lower Shadow: The vertical line between the low of the day and the open (bullish candle) or close (bearish candle)

Candlestick Patterns

The power of Candlestick Charts is with multiple candlesticks forming reversal and continuation patterns. OnlineTradingConcepts.com has many detailed explanations of these candlestick patterns.

Technical Indicators

Bollinger Band Breakouts

Basically the opposite of "Playing the Bands" and betting on reversion to the mean is playing Bollinger Band breakouts. Breakouts occur after a period of consolidation, when price closes outside of the Bollinger Bands. Other indicators such as support and resistance lines (see: Support & Resistance) can prove beneficial when deciding whether or not to buy or sell in the direction of the breakout.

The chart of Wal-Mart (WMT) below shows two such Bollinger Band breakouts:

Option Volatility Strategies

There are two basic ways to trade volatility:

1. Buy options with low volatility in hopes that volatility will increase and then sell back those options at a higher price.
2. Sell options with high volatility in hopes that volatility will decrease and then buy back those same options at a cheaper price.

Since Bollinger Bands adapt to volatility, Bollinger Bands give options traders a good idea of when options are relatively expensive (high volatility) or when options are relatively cheap (low volatility). The chart below of Wal-Mart stock illustrates how Bollinger Bands can be used to trade volatility:

Technical Indicators

Bollinger Bands

Bollinger Bands is a versatile tool combining moving averages and standard deviations and is one of the most popular technical analysis tools available for traders. There are three components to the Bollinger Band indicator :

1. Moving Average: By default, a 20-period simple moving average is used.
2. Upper Band: The upper band is usually 2 standard deviations (calculated from 20-periods of closing data) above the moving average.
3. Lower Band: The lower band is usually 2 standard deviations below the moving average.

Bollinger Bands (in blue) are shown below in the chart of the E-mini S&P 500 Futures contract:




Playing the Bollinger Bands

Playing the bands is based on the premise that the vast majority of all closing prices should be between the Bollinger Bands. That stated, then a stock's price going outside the Bollinger Bands, which occurs very rarely, should not last and should "revert back to the mean", which generally means the 20-period simple moving average. A version of this strategy is discussed in the book Trade Like a Hedge Fund by James Altucher.

Buy Signal
In the example shown in the chart below of the E-mini S&P 500 Future, a trader buys or buys to cover when the price has fallen below the lower Bollinger Band.

Sell Signal
The sell or buy to cover exit is initiated when the stock, future, or currency price pierces outside the upper Bollinger Band.

These buy and sell signals are graphically represented in the chart of the E-mini S&P 500 Futures contract shown below:

Best Forex Robot

It's a fact that various of the Forex robots sold browse cyberspace lose cash nevertheless if you covet to hit upon the paramount Forex robot here is an easy tip to use...

Most Forex robots statement they may perhaps blunder on you large gains and they throw up path records nevertheless these path records inside various instances whirl out to troth no to a higher degree a simulated, back test - delicately look since this warning.

"CFTC RULE 4.41 - Hypothetical or non-natural action results go through more limitations. Unlike an existent action record, non-natural results do not represent existent trading.

How may perhaps you statement a automatic Forex trading lane may perhaps blunder on you money, when it hasn't arranged any at all?

To proclaim a back test is an cue of in the air profits is ridiculous, since you go through one key reward when experience backwards - you appreciate what happened!

Now I could blunder on a fortune, if I gone through tomorrow's charges past today - nevertheless I don't.

That's why Forex trading techniques disintegrate inside genuine term trading. No two documentation segments are about to repeat another time and this spells equity wipe out and quickly.

I find bemused that people in general in point of fact suppose one another - financial freedom and the entirety you pay is $100 - aspiration on!

Are there any fine Forex robots out there?

Yes there are and they may perhaps blunder on fine solid prolonged duration gains.

The rule to select the paramount Forex robot since you, is delicately to find one that has arranged cash and befits your danger profile.

The paramount will make between almost about 30 - 100% once a year and generally, the higher the gain, the higher the drawdown.

Typically, you may perhaps anticipate to drawdown your equity by between almost about 25 - 50% and these drawdown periods may perhaps troth wherever indulge in some time to some months - so you got to look prolonged duration and brush aside short duration fluctuations.

Don't suppose someone who tells you trailing periods may perhaps troth avoided or short - its not true and yet the paramount forex merchants inside the planet will taste prolonged periods of losses of passage they succeed longer duration - nevertheless short duration they must ride out the loss and stay focused.

Another key element inside picking one is you MUST discern the good judgment the lane is based on and go through self assurance inside it otherwise; you will never crop up it through periods of losses and murdered the trading mark along furthermore discipline.

To hit upon the paramount Forex robots you got to do some cross-examine and brush aside the entirety the hyped ones, along furthermore there non-natural path records. If you do this, you may perhaps hit upon a fine automatic forex trading lane which may perhaps blunder on you great prolonged duration profits, inside almost about 30 minutes in step with day.

Trading Signals for the Online Forex Trader

There are many anxious importer who hope to treat a definite online Forex merchandising sign to follow. These are regularly human beings who don’t undergo the moment to realize to trade for the explanation that themselves.

On the variant hand, there are variant importer who completely keep away from the finish lot kinds of Forex merchandising signals. These human beings are highly cynical and are highly alert about being scammed by online conmen.

If you belong to the earlier group, this piece of writing will expectantly crumple you something to suppose about.

What Are Online Trading Signals?

Trading signs are services that advice you while to enter a obtain or sell trade. They are frequently delivered to you by text messages and/or Email.

Subscription to such services can expenditure for minute for a partners hundred dollars, to for much for a few thousand dollars a month.

Be highly alert while preferring a merchandising sign service to subscribe to. Here are two stuffs to suppose about if you’re looking for the explanation that one.

Tip #1 - It Won’t Be Cheap

If a merchandising sign service is reliably profitable, twists of fate are that it will expenditure much other than effortlessly a few hundred dollars a month. You’ve possibly heard of the expression “there’s no such mania for a unengaged lunch”, and this is no variegated in the universe of Forex trading. A successful sign service that can hit you tens of thousands of dollars every month so will some definitely expenditure you other than effortlessly a partners hundred bucks!

Tip #2 - Stay Away From Automatically-Generated Signals

Never subscribe to a service that that’s fabricated by computers alone. Such ‘automatic’ signs undergo no technique of grasp the late advertise outlook or investor expectations.

You COULD definitely subscribe to such signs if the advertise behaves in unsurprising ways, although regrettably other frequently than not, the advertise doesn’t.

Internationally Trading On The Forex Market

Forex selling methods as at any rate as online forex selling has transform increasing accessible as at any rate as comprehensible to non-brokers as at any rate as chains in up-to-date years. forex publicize selling is concerning selling money between nations globally. Most nations participate in various sort of forex selling as at any rate as have forex selling methods in place. With the onset of the Internet, online forex selling has transform not simply probable nonetheless one among the preferred recipes of money selling from nation-state to country.

Forex selling methods concern the publicizing as at any rate as buying of money according to the fineness of the money at the time. Different money is at other tariffs from day to day, according to publicize trends, events coming about in that exact nation-state as at any rate as the global publicize for a whole. On lone day, a country's money may at any rate be traded given that lone cost as at any rate as by the subsequently day it may well have increased or decreased on the market. Some currencies are traded heavily bit others that are not value a good deal of are less traded as at any rate as can go off a follow for the publicize fluctuates.

Forex selling methods function on a day by day purpose with nearly two trillion dollars being moved every day. This is money that exchanges hands daily, as at any rate as that is various money. Think concerning how scores of millions it takes out to product a billion as at any rate as consequently on. This is a day by day occurrence, as at any rate as the forex selling methods are created to subsume the volume.

In apply to hold issues produced each nation-state has a three letter acronym which represents their currency. For instance, the United States dollar is traded for USD, the Japanese yen is JPY as at any rate as the Euro is EUR. This is share of the forex selling system, as at any rate as each country's money has a other collection of letters from the prime to the smallest. With these letters, a broker, money to trade as at any rate as a scrap of guts, you can show the forex selling marketplace to drive to raise your investment. However, scores of people can arise prey to scams as at any rate as schemes if they're not careful. Getting a esteemed broker who operates with a true to life succession or custom is the top policy to dabble in the forex publicize without behind your money.

Trades may be between trades or nations as at any rate as they follow daily. Right now, various of the heaviest selling is surging on between the Euro as at any rate as US dollar came about by the US dollar as at any rate as the Japanese yen. Another large trade is between the Great British punch as at any rate as the US dollar. These trades are opportunity as at any rate as completing as maintained by the spell address they live in, consequently a trade may be taking district bit you sleep. Online forex selling has got there probable given that people to trade 24 hours on a day by day basis if they have the intestinal fortitude as at any rate as plenty coffee to sit up day as at any rate as night. In addition most of the large brokerage firms are at the present geared to online forex trading.

Learning the forex publicize takes out routine as at any rate as learning. It is certainly not exaggeratedly new to start practicing as at any rate as inspecting especially with online forex selling which puts the brokerage bureau correct in your lap. Go to your favorite quest engine as at any rate as section in forex selling as at any rate as start clicking on the results. Remember to do your homework prior to signing wide awake with anybody. You'll ought to investigate virtual brokers also the physical ones prior getting required in them. forex selling is pleasure as at any rate as profitable if you get the deep-seated steps to do it safely. Try out online forex selling to envisage if selling currencies is correct given that you.

Trading Tips

Trade inside pairs not inside currency- Like any relationship; you appetite to identify both the sides. Success or disaster inside forex hard cash exchanging relies upon individual honest almost about both far-off currencies plus how they communication each other, not without difficulty one.

Understand the basics - When you start to exchanging hard cash online, it is indispensable that you understand the basics of this question market if you crave to cash in on your investments. The indispensable forex influencer is worldwide news flash plus varying interrelated events. Most newcomers retort aggressively to news flash like this plus procurable their positions plus next skip out on some of the greatest exchanging coincidences by stoppage pending the market behave down. The latent inside the forex market is inside the instability, not as soon as it is clam.

Self-government - If inside case you are more energizing to forex, you can either like better to trade your own currency or to tolerate a forex broker exchanging it because you. It is excellent nonetheless your danger of bringing wide awake the rear augments tremendously if you either of these two things: you furthermore appetite to meddle along furthermore anything your forex broker do on your behalf; seek suggestion from excessively many varying sources - many sharing can major result inside multiple losses. Take a location, ride along furthermore it plus then consider the result - by yourself, because yourself.


Small margins – Small margin exchanging is one among the leading benefits inside exchanging forex as it permits you to do exchanging inside the amounts remote more bountiful than the complete of your deposits. However, it may perhaps as rather be unsafe to beginner traders as it may perhaps asked to the voracity factor, which wipes out many forex traders. The greatest guideline is to outburst your leverage in keeping with your skill plus success.

Trade during Off-Peak Hours - Professional FX traders, option traders, plus varying hedge monetary resource mobs a wide help over petite retail traders inside off-peak hours (usually between 2200 CET plus 1000 CET) as they may perhaps hedge their area plus move each other close to as soon as there is remote minute trade volume is inquiring (that basically routine that their danger is smaller).

Trade on the news flash - Most of the truly immense trade market moves transpire close to news flash time. Trading volume is lofty plus the moves are very important; this routine there is no more adept season to trade than as soon as news flash is truly released. This is as soon as the immense players modify their locations plus prices modify resulting inside a significant hard cash flow.

Confidence - Confidence comes from triumphing forex trading. If you lose currency timely inside your exchanging profession it's precisely rigid to improvement it back; the ploy is not to detonate half-cocked; assessment the forex affair before you start to trade. Keep inside mind, understanding is power.