How To Use FX Options In Forex Trading


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Or is this consolidation coming before a move higher? The potential profit is infinite — similar to the vanilla option.

Trade Management Flexibility and Maximizing Reward

Guppy Multiple Mas system is a trend following strategy based on Exponential moving averages. Time Frame 15 min, 30 min, 60 min. Financial Markets: Forex, Commodities, Indicies.

Basic Use of a Currency Option Taking a look at Figure 1, we can see resistance formed just below the key 1. We confirm this by the technical double top formation. This is a great time for a put option. An FX trader looking to short the Australian dollar against the U. Premium of pips. Profit potential for this trade is infinite.

But in this case, the trade should be set to exit at 0. Preferred by traders, spread trades are a bit more complicated but they do become easier with practice. The first of these spread trades is the debit spread , also known as the bull call or bear put. Here, the trader is confident of the exchange rate's direction, but wants to play it a bit safer with a little less risk.

In Figure 2, we see an This is a perfect opportunity to place a bull call spread because the price level will likely find some support and climb. Implementing a bull call debit spread would look something like this:. The Credit Spread Trade The approach is similar for a credit spread. But instead of paying out the premium, the currency option trader is looking to profit from the premium through the spread while maintaining a trade direction.

This strategy is sometimes referred to as a bull put or bear call spread. Learn more about this and other spreads in Option Spread Strategies. With support at So, the trade would be broken down like this:. As anyone can see, it's a great strategy to implement when a trader is bullish in a bear market. Not only is the trader gaining from the option premium , but he or she is also avoiding the use of any real cash to implement it. Both sets of strategies are great for directional plays.

Option Straddle So, what happens if the trader is neutral against the currency, but expects a short-term change in volatility? Similar to comparable equity options plays, currency traders will construct an option straddle strategy. These are great trades for the FX portfolio in order to capture a potential breakout move or lulled pause in the exchange rate. The straddle is a bit simpler to set up compared to credit or debit spread trades. In a straddle, the trader knows that a breakout is imminent, but the direction is unclear.

In this case, it's best to buy both a call and a put in order to capture the breakout. Will the spot rate continue lower? Time Frame 15 min, 30 min, 60 min. SDX pivot for intraday trading optional.

Filter arrows indicator 15 min time frame setting 30, 30 min time frame setting 60, 60 min time frame setting ,. Trading rules Guppy Multiple Mas System.

Wait for trade setups in the direction of the Guppy Multiple Mas. Buy arrow filtered by. Sell arrow filtered by. This strategy is also good for trading intraday and swing trading withot binary options. In the folder there is also the template for intraday trading.

In the pictures Guppy Multiple Mas System in action. Share your opinion, can help everyone to understand the forex strategy.