How to trade FX Options
FX Options relate to so-called contracts for differences that are aiming to reach maximum gain appeared between opened and closed positions. Currency pairs are considered as an object for such type of trading.
Mechanism and benefits
In general there is nothing difficult with deals related to forex options. Like any type of trading the process is starting from analysis of market conditions, external factors such as economical and political environment and general financial conditions related to chosen currency pairs. Additionally it is great to research trend lines and apply for historical prices and changes existed for the last time. By the way, currency pairs cab be divided by two types: exotic (related to currencies of countries with developing economics) and basic (related to currencies of countries with stable/strong economics).
For now IQ Option offers traders next base pairs to be trade: EUR/USD and USD/EUR; USD/JPY and JPY/USD; USD/CHF and CHF/USD. And following exotic pairs: NZD/JPY, NZD/USD, NZD/HKD and others. Anyway, IQ option plan to extend range of available for users of the platform pairs.
The main advantages of FX Options are limitation of risk of losses to invested amount only, setting of two types of control over losses/gaining as manual, as automatic and adding certain level of leverage proposed by service. Leverage is a tool for profit increase without additional investments, although it increases not only gains, but losses too.
Steps to be performed for reaching success
Prepare deep analysis. There is not matter what approach to use for it: fundamental or technical. Experience and trader’s sense are the base for decision taken by user of the service, but anyway without analytical work no strategy and tactic can be determined and no further actions should be done.
According to information obtained from the first point respective currency pair should be chosen.
The amount to be invested is selected. There aren’t limitations for traders, who works with IQ Option: the smallest amount to be applied for the deal is equal to one dollar, the rest may be covered by leverage or not covered at all if the trader is too conservative and doesn’t like risk.
Define the leverage, that multiplies any positive or negative results from the deal.
Choose point for loss/profit stop. This way allows to fix achieved favorable results and stop losing. In case of strong confident level of the trader and big experience, such point cab be chosen manually by monitoring dealing results and timely reaction.
Set the prediction applied for the deal related to changes in currency position: will it become higher or lower.
Global environment is rather dynamic, that explains why currency trading is one of the most popular type for options and still have lots of perspectives for future.