How to Trade the Forex Market Using Binary Options

It is no secret that the Forex market can be a very profitable place to be if you want to make money by trading currencies.

However, it is also no secret that achieving consistency within the Forex market requires a lot of preparation (you need education and reliable trading tools) because not only you need to have a good idea of where the price is about to move, but also how far it is going to go.

For instance if you are trading the EUR/USD pair and you decide it is a good idea to go long, you would place a "buy" order, because you are expecting the price of the Euro against the dollar to go up.

If you placed your trade using 1 mini lot (this equals $1 profit for every pip), and your target for that trade is 30 pips, you would need to have at least $1,000 in your account to meet margin requirements and allow some room for drawdown, and if the trade is successful you will make $30 in profits.

However, in order for this to happen the price of the Euro has to move 30 pips against the dollar, otherwise you will not reach the intended target and realize the profits. As you can see, if you trade the Forex market using the traditional approach you will have not only to predict where the price is going, but also how far it is going, which simply makes it twice as difficult.

Now, if you have $1,000 in a binary options trading account, what would you need in order to place a successful trade, and moreover, what kind of profits a successful trade would deliver for you?

In order to answer this question, let us assume that the price of the EUR/USD is at 1.47849 and based a given analysis of the market (e.g. swing trading pattern recognition) you think that the Euro is trending up against the Dollar.

In this case you would go long as well, but instead of placing a "buy" order for currency, you would simply buy a $100 call option for the EUR/USD pair with a 1 hour expiration. If you are right and the price goes up, even if it is only 0.001 pip above the price you purchased your call option (which is the strike price), and it remains there or above until expiration, you would get as much as 75% return on your $100 investment.

In other words, a single $100 trade could easily deliver $75 in profits and you could repeat this process several times during the day.

But the remarkable thing here is that you did not need the price to go up 30 pips in 1 hour to get a 75% return on your investment, you only needed 0.001 points of variation to achieve this.

In this scenario you certainly had to determine in what direction the price was going to move (this is usually an ingredient of the trading process) BUT your forecast did not have to take you all the way to a 30 pips increase in the price in order for you to make get the expected return, because you got it with just 0.001 points of variation, and you made $75 instead of $30.

Also, you can open a binary options account with only $100 and you can trade with as little as $30 with no commissions charges.

So as you can see, the potential of Forex trading through binary options is huge and the process is far simpler thus increasing your chances for profitable trades, however, you do need to have a sense of where the market is going. Provided that you have this, you are likely to make take far more winning trades than losing ones and a lot more money as well.

Forex Megadroid - Some Tips in Using This Forex Trading Software!

Are you having a hard time coping up with the dynamics and complexities of the foreign exchange trading market? Do you need help with keeping up with the fast paced and ever changing conditions and trends of the forex trading market industry? Did you just got started with and you joined the foreign exchange market just recently? Are you a novice trader and you need some help and guidance in knowing the system of the market, finding your way around it and then learning the ropes? If that is the case then you are very blessed and this must be one of your luckiest days.

Fortunately for you and other people like you who still feel you are in a maze every time you are about to make a market trade, there are some guides and tools that are available for your use to be able to cope up with the market. There are many robots that could be of use to you should you need one and all of those are up for grabs. There are also guides on how to use those forex robots or programs just like this one.

The very first thing that you have to do is to do a research on the particular forex robot that you want to buy. Equipping yourself with as much information pays a lot. Reviews on Megadroid will tell you how reliable this robot it.

Second is to make sure that the product you are going to acquire is original and legit. You do not want to waste your money on some crap product that will not really work. Buy from accredited dealers of Megadroid to avoid being scammed

Third is to familiarize yourself with the product that you have chosen. Learn how it works. With Megadroid, you will not have a hard time doing so because this product is so easy to operate and understand.

Investments

The world of investments is an ever-expanding field of different financial instruments and markets to choose from. Financial market innovation ensures that keeping up with the new financial products and starting research the markets on your own can be an overwhelming task.

Here, you'll find basic information on some of the major instruments and markets, all in one place, to help you on your research efforts. This way you'll save time and effort, which can be put to better use, researching the actual companies or financial products.

Sometimes investors keep their field of knowledge too narrow. By expanding your knowledge about the different markets and financial products, you may get new investment ideas, portfolio weighting strategies, or risk management tools, for example.

Keeping Up with the Market Changes

In addition to the basic information, this site has been designed to offer advice on further resources and educational tools. Most of the further resources, apart from professional market training, are completely free, providing a great return on invested time, to put it that way.

The articles put emphasis on the major financial product areas, but you'll find discussion on the on-going innavation in this field, which continuously provides links between different product areas.

For example, financial innovation has brought us credit derivatives, new commodity markets (such as emission trading), and negative coupon bonds, to name few examples. You might also be interested in forex investing.

The areas covered include:

investment go-betweens (banks, advisors)
different types of investment funds
the dark side of investing (fraud)
international aspects of investing
and much more.

Put together, you'll find a well rounded view on financial education, research resources, and financial markets, to get you to the next level on your efforts to become a better investor.

Methods of money management

Working in Forex traders should be able to distribute capital correctly, calculate the amount of money involved in a deal to get sufficient profit; and in case of losses not to lose all deposited money.

For these purposes special methods of money management exist:

• Absence of money management. Many traders who open a position don't count money used in operations, don't calculate approximate profit and possible losses. This is one of the tactics. But if the capital is not large it will disappear after several deals.
• Multilateral contracts. Opening several positions of different instruments on Forex, such as EURUSD and EURGBP in the case of prices moving in the right direction, the trader can get good profits from these contracts. Both profit and loss in such deals can be significant.
• Fixed sum of money. Depending on the amount of money in his account the trader decides how much he can put at risk when opening one or another position. The trader doesn't exceed the limit he has fixed himself.
• Fixed percentage of capital. This method is similar to the previous one with the only difference being that the trader sets the percentage of the capital and not the amount of the capital itself.
• Coordination of profits and losses. It is necessary to keep statistics of all operations (number of losses, wins and their connection). This connection shows that losses and wins take turns or several losses are followed by several successful operations. It makes sense to increase the volume of the position after a number of losses hoping for winning and, on the contrary, decrease after a positive period expecting losses again.
• Intersection of the curved moving capital average. The principle is based on the well-known method of moving average as a signal for entering the market or leaving it. Moving averages (long one and short one) are used for estimating the results of arranged deals. If the short curved is above the long one it's a signal for opening positions to gain profit; and if it's below it then better times are still to come.

Having chosen one or another method of money management for trading, you will be able to use your money rationally, and it will bring profit. Methods of money management are applied before opening of positions.

Weekly Trading Update - 23-27 November 2009

Well I'm kicking myself for not staying with the GBP/JPY breakout trade. You may recall that I highlighted a possible breakout last week and when it did break downwards I banked around 100 points. However this breakout has continued into this week and it's since fallen another 800 points, so I really missed out on some huge gains on this occasion. However the one trading position I opened this week turned out pretty well.

It was on the GBP/USD pair and I went short yesterday afternoon (when all my American friends were enjoying yet another day off, Happy Thanksgiving by the way ) after the EMAs finally crossed downwards on the 4 hour chart.

I actually traded against the trend on this occasion, but I've been bearish on this pair for a few weeks now and just felt that it was due a retracement, particularly as there was a nice bearish divergence pattern on several indicators such as the MACD, Smoothed Repulse and TRIX indicators.

After the EMAs crossed downwards on the 4 hour chart, I waited for a slight pull-back and went short at 1.6560. As I normally do, I closed half the position for 50 points and let the other half run, moving my stop loss down to break-even.

I set my target at 1.6400 and let it run overnight, and despite thinking that this may be a little ambitious, the price easily reached this target, helped by the bleak news from Dubai, and the effect this may have on British banks who have exposure in this part of the world.

So overall it was a solid profit and a decent enough week. It could have been even better if I could have managed to open a short on the EUR/USD pair as well, but unfortunately the crossover occurred overnight so I couldn't trade it. My next target is the EUR/GBP pair (providing the Supertrend indicator doesn't turn bullish on the daily chart) but I don't think this is likely to break downwards until next week now.

So that probably brings an end to my trading this week. I hope you all have a great weekend.

(If you would like full details of my main 4 hour trading strategy, you can access it for free when you subscribe to my newsletter. Simply fill in the short form above).

Forex News Trading

Traders on the Foreign Exchange market, Forex market for short, can potentially make thousands of dollars based on the volatility and fluctuations of a country’s currency. To better themselves and have a leading advantage over other traders, some Forex traders and investors participate in a practice known as news trading. The risks are very high, but the potential gains can be worth thousands of dollars and many traders and investors use this technique.

The technique of news trading is quite simple. It is the trading of foreign currency immediately before or after an important economic news announcement. After such announcements, there is a high possibility that market prices will fluctuate, either for the better or worse, depending on the announcement. For example, if the U. S. Federal Reserve announces another increase of the interest rate, many traders might invest in the U.S. dollar as it is expected that its value will appreciate. The main advantage of news trading is the potential for a country’s currency to make huge gains or losses in very little time. Within minutes of an economic announcement, a country’s currency can gain or lose one hundred points almost instantly. The potential of huge profits attracts Foreign Exchange traders and investors, however there are various risks associated with news trading.

Like any investment, there is always a risk, and news trading on the Forex market is no different. Though the potential profits are huge, the losses are also equally as large. The dangers of news trading come from the fact that a trade must be made quickly or else you are going to lose. If you are caught on the bad side of a trade, your money will be gone quicker than you can blink your eye. You will lose money so fast that there won’t even be time for you to manually close your trades, leaving you with nothing. Stop-loss orders are also potentially dangerous as there is a high probability of slippage because of the sudden price fluctuation.

Though some investors and traders might get lucky trading news, there is only a small probability that you will make a profit. Even if you are an expert news trader, you should still be very, very cautious when participating in this practice. Successful news trading depends solely on how you get your news. The most successful news traders are the ones with the fastest news feeds and those that are able to quickly place their trades immediately after an announcement has been made. Even using other forms of news trading, such as placing orders above or below the market price is still a guessing game, and those traders in the market who base their trades on guesses, won’t have much money after a short time.

For many Forex traders and investors, their trades are dictated by technical indicators and price indexes. Hours are spent researching every indicator, taking every risk into account and then making a decision based on everything they have studied. However, for a Forex news trader, none of this matter, and the only thing they take into account is economical news announcements.

News trading is possible because the Forex market is always open, unlike many financial markets. In a financial market, securities trades of certain stocks are suspended when an important company announcement is being made. These announcements are usually made after the market has closed for the day. However, because the Foreign Exchange market is open 24 hours, any economic announcement will have direct affects on the currency of that country, and maybe others as well. In the Forex market, there are eight major currencies that are traded, as well as over seventeen derivatives to be traded as well. This means that on any given day, there will always be economic announcements from any of the major traded currencies. The major trader currencies are as follows:

1. U.S. Dollar (USD)
2. Great British Pound (GBP)
3. Euro (EUR)
4. Japanese Yen (JPY)
5. Australian Dollar (AUD)
6. Swiss Franc (CHF)
7. Canadian Dollar (CAD)
8. New Zealand Dollar (NZD)

Because of the availability of each currency, currency pairs, and its derivatives, such as USD/JPY, EUR/USD, AUD/USD, as well as several others, each currency can be traded at any given time because these currencies are globally traded.

Any Forex news trader or news investor will have to have the latest most up to the moment news announcements. Even if the news announcements are only a couple of minutes old, this can have devastating effects for any trader who has risked any sum of money. Most news traders like to keep an eagle eye on any news regarding economical activity, but most importantly news dealing with interest rates changes, FOMC rate decisions, retail sales figures, inflation indicators such as the consumer price index (CPI), producer price index (PPI), unemployment figures, industrial production announcements, boost in business and consumer confidence, as well as business sentiment surveys. Manufacturing sector surveys, trade balance release details, and foreign purchases of U.S. Treasuries may also prove useful for a news trader to better make decisions regarding when or when not to trade.

However, it should be remembered that these news announcements can have ranging impacts on a country’s currency, and after an announcement, the volatility of a currency may greatly fluctuate. It is important to take advantage of news that creates movements in volatility that will last for a few minutes or even hours. Trading on the Forex market based solely on news is a difficult and sometimes dangerous practice. However, there are some indicators that can make a news trader’s job easier, such as breakout indicators (Bollinger bands, breakout of a candlestick bar, or a price bar). Research has proved that news announcements can impact a currency’s value quite severely, in some cases it can gain or lose anywhere from 33 pips to 124 pips, opening up the ideal trading opportunity looked for by news traders. If a news trader is able to act quickly enough, even the smallest news release can be turned into a potential profit of thousands of dollars. However, it is important to remember the volatility of such announcements, and although the profits seem endless, the losses can happen too.