I realize that it has been several days since my last post, and hopefully a few of you have missed me. It is always nice to be missed!
For the last several days I have been in Tampa, Florida, attending meetings and an educational conference. In fact, I am still here! I am sitting in the Tampa International Airport tapping away on my lap top's keyboard, making use of the time before I board my flight.
We talk a lot about whether you should spend money on various educational products. I have always challenged people to think critically about this. This trip cost me a fair amount of money, but it was very much worth the time and the expense. In fact, I expect that my investment will be repaid many, many times over.
There are numerous opportunities for each of us to educate and improve ourselves. Some of those opportunities are better than others. I don't want you to stress over this stuff, but just ask yourself why you are interested in attending a given event or why you are considering the purpose of a particular course. Then ask yourself what benefit you hope to gain and whether the cost is justified.
Okay. So back to options trading!
I have a few positions in my personal accounts. Just one in the private member's account. The limited number of positions was due in large part to the fact that I knew I would be out-of-town, but as I await my flight I have been looking at the market and have a few orders that I plan on executing tomorrow.
There is a lot of uncertainty about the market right now, which translates into a good opportunity for options traders. Premiums are a bit higher, which makes me feel good about selling spreads.
Do not run out and just sell spreads, however!
This is much like buying educational products. Ask yourself what it is you hope to achieve. What is your overall investment and wealth building strategy? Options are simply a tool that you can use to effect a larger strategy. Without that overall strategic plan, you're just gambling on your ability to "be right" with any given trade.
You will never always be right. When you're wrong, just make sure you know how to deal with it and that you're "wrong" for the "right" reasons.
The idea is that you want to fit your trading into a larger plan to grow wealth. Ideally, your option trading will compliment your overall investing activities and even offset some of your investment risk.
From time to time I will try to revisit this issue here. Once you grasp the concept it can make a real significant difference in your financial life.
Trade well!
Christopher Smith
TheOptionClub.com
Discover the stock options strategies favored by professional traders in our FREE options trading mini-course!
Subscribe To
Posts
Sunday, September 30, 2007
Friday, September 21, 2007
Forex Trading Video by Bill Poulos
A lot of you are asking what it's like to trade the Forex market...
You have also been asking how does Bill Poulus' trading methods work...
Those are the types of questions I have received and Bill had anticipated those very types of questions, too. He has recorded a video on day-by-day basis, beginning on September 6, 2007, and finishing a couple days ago, on September 18, 2007.
The video is cued and ready for viewing. You will get to see exactly what it feels like to quickly spot and jump on potential Forex moves BEFORE they happen and then ride them.
Remember, you're not scanning through thousands of stocks. There are only a handful of major currency pairs and you can narrow that down to just a few that you want to follow.
How long does it take to look at 3 or 4 price charts?
Are you beginning to see why this so powerful? The largest financial market in the world... The most liquid market in the world... Review a few price charts at night, looking for one of four set-ups...
The video is basically a daily trade diary, allowing you to discover for yourself:
(No name or email required or view it, it will just automatically load.)
Bill has filled most of the available seats in his charter class of Forex trading students, but has said he will leave the video up until he fills the remaining seats.
Good Trading,
Christopher Smith
TheOptionClub.com
You have also been asking how does Bill Poulus' trading methods work...
Those are the types of questions I have received and Bill had anticipated those very types of questions, too. He has recorded a video on day-by-day basis, beginning on September 6, 2007, and finishing a couple days ago, on September 18, 2007.
The video is cued and ready for viewing. You will get to see exactly what it feels like to quickly spot and jump on potential Forex moves BEFORE they happen and then ride them.
Remember, you're not scanning through thousands of stocks. There are only a handful of major currency pairs and you can narrow that down to just a few that you want to follow.
How long does it take to look at 3 or 4 price charts?
Are you beginning to see why this so powerful? The largest financial market in the world... The most liquid market in the world... Review a few price charts at night, looking for one of four set-ups...
The video is basically a daily trade diary, allowing you to discover for yourself:
- How to get in the market
- Where to place your stops
- How to take a quick profit
- When to let your trade RIDE so you can enjoy even MORE profit...
(No name or email required or view it, it will just automatically load.)
Bill has filled most of the available seats in his charter class of Forex trading students, but has said he will leave the video up until he fills the remaining seats.
Good Trading,
Christopher Smith
TheOptionClub.com
Sunday, September 16, 2007
Forex Profit Accelerator Review
Well, Bill Poulos' new Forex trading course is about to hit the market and the big question on the minds of would-be currency traders is whether it is any good. The trouble is that because it is a new course there are very few copies out there in the hands of people who can comment upon them.
Nonetheless, some advance preview copies have made their way into the hands of reviewers and the first review of Bill Poulos' Forex Profit Accelerator is now out! All things considered, the course is well designed and provides a lot of tools for those who wish to venture into the currency market.
Four trading systems and a complete money management system are the hall marks of this course. The four trading methods are complimentary of each other, allowing you to trade both the upside and downside moves, grab profits from short-term moves of just a few days, jump onto longer term trends, and make counter trend plays.
As good as his prior courses have been, this course out does all of them. You can read a comprehensive review of the course here:
I think we will see a lot more press on this course as things unfold, but this is the first full review. I hope you find it helpful.
Christopher Smith
TheOptionClub.com
Nonetheless, some advance preview copies have made their way into the hands of reviewers and the first review of Bill Poulos' Forex Profit Accelerator is now out! All things considered, the course is well designed and provides a lot of tools for those who wish to venture into the currency market.
Four trading systems and a complete money management system are the hall marks of this course. The four trading methods are complimentary of each other, allowing you to trade both the upside and downside moves, grab profits from short-term moves of just a few days, jump onto longer term trends, and make counter trend plays.
As good as his prior courses have been, this course out does all of them. You can read a comprehensive review of the course here:
I think we will see a lot more press on this course as things unfold, but this is the first full review. I hope you find it helpful.
Christopher Smith
TheOptionClub.com
Friday, September 14, 2007
Profiting From Range Bound Markets
We are one week September's expiration and the market has been range bound now since mid-August. The volatility has made for some nice premium in the index option chains, which combined with the tight range has made for excellent iron condor conditions.
I had backed off of my long vega trades, for obvious reasons, but recently opened a new double diagonal position for a small credit. If IV falls out of the trade, at least I'm in for a credit and will not be worried about having to pay down a fat debit by selling thin front month premium.
Looking back on this correction, my accounts have weathered the storm just fine. I'll probably comb through things over the weekend to see what there is to learn.
I am trying to get some details about this Options Intensive Workshop that Options University is hosting next month in San Francisco. So far, what I know is that the concept behind the workshop is to take attendees from an academic understanding of how options work to a practical application in the market.
Once we learn the fundamentals, we can all sit around and banter about options on a theoretical basis. Looking at the market, spotting the opportunity, and applying or adjusting an option strategy effectively is a whole other kettle of fish. It's totally doable, though.
Brett and Ron are really pushing hard to recruit some well known talent. The names that I have heard mentioned as lecturers include:
There are others, but those are a few that come to mind right off the top of my head. The idea is to put you in a room with some great trading minds and let you learn from the best. Brett and Ron are really trying to over deliver on this.
Christopher Smith
TheOptionClub.com
I had backed off of my long vega trades, for obvious reasons, but recently opened a new double diagonal position for a small credit. If IV falls out of the trade, at least I'm in for a credit and will not be worried about having to pay down a fat debit by selling thin front month premium.
Looking back on this correction, my accounts have weathered the storm just fine. I'll probably comb through things over the weekend to see what there is to learn.
I am trying to get some details about this Options Intensive Workshop that Options University is hosting next month in San Francisco. So far, what I know is that the concept behind the workshop is to take attendees from an academic understanding of how options work to a practical application in the market.
Once we learn the fundamentals, we can all sit around and banter about options on a theoretical basis. Looking at the market, spotting the opportunity, and applying or adjusting an option strategy effectively is a whole other kettle of fish. It's totally doable, though.
Brett and Ron are really pushing hard to recruit some well known talent. The names that I have heard mentioned as lecturers include:
- Larry McMillan, author of McMillan on Options and Options As A Strategic Investment;
- Jon Najarian, aka "Dr. J";
- Price Headley from BigTrends.com,
- Tom Sosnoff from Think or Swim
There are others, but those are a few that come to mind right off the top of my head. The idea is to put you in a room with some great trading minds and let you learn from the best. Brett and Ron are really trying to over deliver on this.
Christopher Smith
TheOptionClub.com
Thursday, September 13, 2007
A Life Long Trading Education And A Real Bargin To Boot!
Yesterday I received an e-mail from one of TheOptionClub.com members, questioning why I am often "blasting seminars that charge 2-3K" but then sponsor events such as Options University's Options Intensive Live Boot Camp.
A good question, I thought! A fair one, too...
I wanted to address this "head on" because there is a lot of confusion out there about financial education.
First, let's set the record straight. I don't believe that I've ever "blasted" any seminar solely about cost. A good education is worth some expense.
What I have done is encourage people to evaluate the expense of a seminar, trading course, software, data service, or whatever, in the context of a business or investment expense. For example, does it make sense to spend $3,000 if you're trading a $5,000 account?
If you hope/expect to double your account as a result of the expense, then perhaps it makes sense. On the other hand, if you expect to return 50% on the account then you may question whether you still want to spend the money.
What I have seen some people do is charge several thousands of dollars in seminars, software, data feeds, etc., to a credit card with the notion that they "need" these things to trade. Worse still, they are hoping to double their account in a short period of time to pay off the credit card.
The message I try to consistently deliver is that you want to make those purchase decisions in the context of what is realistic and reasonable.
We all eventually learn that the cost of education comes in many forms, but that there is always a cost associated with it. When you can learn something from a free web site or a $50 book, it can be a great value. That does not mean that information and knowledge are not worth paying for.
I have spent a good deal of money on my education, and I'll continue to do so. So far this year, I've spent thousands. This month I'll be flying to the East Cost to attend a three day seminar. The best we can do is look for reputable sources and approach each buying decision as a professional would. Hopefully, we consider ourselves to be professionals.
Why do I sponsor Options University? I'm one of their a satisfied customers and students. How about Bill Poulos? Yep, a student of his, too.
So, I will continue to make you aware of those products and services that I believe offer good value. Your job is to consider your needs, evaluate the anticipated benefits, and make your own decision.
Just be sure to keep in mind that our education is a life long pursuit. If you are not actively learning, you are probably falling behind.
To your success through knowledge...
Christopher Smith
TheOptionClub.com
A good question, I thought! A fair one, too...
I wanted to address this "head on" because there is a lot of confusion out there about financial education.
First, let's set the record straight. I don't believe that I've ever "blasted" any seminar solely about cost. A good education is worth some expense.
What I have done is encourage people to evaluate the expense of a seminar, trading course, software, data service, or whatever, in the context of a business or investment expense. For example, does it make sense to spend $3,000 if you're trading a $5,000 account?
If you hope/expect to double your account as a result of the expense, then perhaps it makes sense. On the other hand, if you expect to return 50% on the account then you may question whether you still want to spend the money.
What I have seen some people do is charge several thousands of dollars in seminars, software, data feeds, etc., to a credit card with the notion that they "need" these things to trade. Worse still, they are hoping to double their account in a short period of time to pay off the credit card.
The message I try to consistently deliver is that you want to make those purchase decisions in the context of what is realistic and reasonable.
We all eventually learn that the cost of education comes in many forms, but that there is always a cost associated with it. When you can learn something from a free web site or a $50 book, it can be a great value. That does not mean that information and knowledge are not worth paying for.
I have spent a good deal of money on my education, and I'll continue to do so. So far this year, I've spent thousands. This month I'll be flying to the East Cost to attend a three day seminar. The best we can do is look for reputable sources and approach each buying decision as a professional would. Hopefully, we consider ourselves to be professionals.
Why do I sponsor Options University? I'm one of their a satisfied customers and students. How about Bill Poulos? Yep, a student of his, too.
So, I will continue to make you aware of those products and services that I believe offer good value. Your job is to consider your needs, evaluate the anticipated benefits, and make your own decision.
Just be sure to keep in mind that our education is a life long pursuit. If you are not actively learning, you are probably falling behind.
To your success through knowledge...
Christopher Smith
TheOptionClub.com
Monday, September 10, 2007
Forex Profit Accelerator Preview
I have some additional material on foreign exchange trading for you...
http://www.forexprofitacceleratorcourse.com/forex-preview.html
Next week, on Tuesday, September 18th, my mentor, Bill Poulos, will be launching his new Forex trading course. I was privileged to receive a preview copy of what will probably be considered one of the best foreign exchange courses available to the public.
Everything about it is first class...
It is easy to understand...
I can't give you my copy of the course, but I have been granted special permission to give you private access to a Members Web Site Preview so you can see what his trading course is all about before the general public gets a chance to see it.
Here are a few of the things you'll receive access to on the preview site, beginning TODAY:
** Access to the PIP FEEDER service where you can get daily lists of the Forex pairs that have met the trade alert criteria. These are the Forex pairs that have a high probability of entering into potentially profitable positions any day now. Eventually, they will be charging $197/mo for this service, but it's complimentary on the Members Web Site Preview.
** The "Pip Vault", which contains actual Forex trade examples that you can view on videos, so you can see exactly how his students can trade in less then 20 minutes a night.
** Bonus Forex tutorials, including a very detailed lesson on the ins and outs of Forex trading using one of the popular charting and trading software packages on the market.
** Previews of the actual CD-ROMs that ship with the course so you can see exactly the type of material that's on them.
Go ahead and check it out now by visiting the web page here now:
http://www.forexprofitacceleratorcourse.com/forex-preview.html
So, why open the doors to all of this?
Producing a course like this is very involved.
Once you get past all of the editing and revision and everything is in final, you need to place an order with the printer who wants to be paid up front.
The number of courses you order is partly a function of anticipated product demand (which is guess) and your ability to provide service to the purchasers of the course.
The short version of the story is that there are 950 copies of the course available for this release.
There are already more than 20,000 traders interested in it. Bill knows he will sell out of the course...
...but he wants to do his best to make sure that those who buy it really want it. It is frustrating to have 20,000 eager buyers, then have someone return the course...
That's why he's letting me give you complimentary access to his Members Web Site Preview, but only until the course launches on September 18th.
By doing so, Bill hopes to let people "kick the tires" so that only those traders who are truly serious about learning how to trade the Forex markets get a copy of the course.
It's very straight forward.
Plus, if you are just curious about foreign exchange it's a great opportunity to get some insight into how things work.
Good Trading,
Christopher Smith
TheOptionClub.com
http://www.forexprofitacceleratorcourse.com/forex-preview.html
Next week, on Tuesday, September 18th, my mentor, Bill Poulos, will be launching his new Forex trading course. I was privileged to receive a preview copy of what will probably be considered one of the best foreign exchange courses available to the public.
Everything about it is first class...
It is easy to understand...
I can't give you my copy of the course, but I have been granted special permission to give you private access to a Members Web Site Preview so you can see what his trading course is all about before the general public gets a chance to see it.
Here are a few of the things you'll receive access to on the preview site, beginning TODAY:
** Access to the PIP FEEDER service where you can get daily lists of the Forex pairs that have met the trade alert criteria. These are the Forex pairs that have a high probability of entering into potentially profitable positions any day now. Eventually, they will be charging $197/mo for this service, but it's complimentary on the Members Web Site Preview.
** The "Pip Vault", which contains actual Forex trade examples that you can view on videos, so you can see exactly how his students can trade in less then 20 minutes a night.
** Bonus Forex tutorials, including a very detailed lesson on the ins and outs of Forex trading using one of the popular charting and trading software packages on the market.
** Previews of the actual CD-ROMs that ship with the course so you can see exactly the type of material that's on them.
Go ahead and check it out now by visiting the web page here now:
http://www.forexprofitacceleratorcourse.com/forex-preview.html
So, why open the doors to all of this?
Producing a course like this is very involved.
Once you get past all of the editing and revision and everything is in final, you need to place an order with the printer who wants to be paid up front.
The number of courses you order is partly a function of anticipated product demand (which is guess) and your ability to provide service to the purchasers of the course.
The short version of the story is that there are 950 copies of the course available for this release.
There are already more than 20,000 traders interested in it. Bill knows he will sell out of the course...
...but he wants to do his best to make sure that those who buy it really want it. It is frustrating to have 20,000 eager buyers, then have someone return the course...
That's why he's letting me give you complimentary access to his Members Web Site Preview, but only until the course launches on September 18th.
By doing so, Bill hopes to let people "kick the tires" so that only those traders who are truly serious about learning how to trade the Forex markets get a copy of the course.
It's very straight forward.
Plus, if you are just curious about foreign exchange it's a great opportunity to get some insight into how things work.
Good Trading,
Christopher Smith
TheOptionClub.com
Friday, September 7, 2007
Forex Profit Accelerator
Let's pick up where we left off yesterday...
You know, I just love trading. Luckily, I have become good at it.
There are several people that I consider mentors, from whom I have learned a lot about the markets and how to trade them.
A few days ago, one of my trading mentors released a report on the Forex markets that, it's fair to say, is creating a bit of a stir...
...the reason being is that it challenges everything that that the general public and probably 90% of Forex traders hold to be true.
You already know that I trade equity options. I do not typically trade stocks, however. There are several reasons for that.
For purposes of trading, I, personally, have found Forex to offer several advantages over the equity markets. Those advantages include things like awesome liquidity and unbelievable leverage, and advantages like this are why so many retail traders are getting involved in the foreign exchange market.
There are some real pitfalls, however...
So if you have ANY interest in discovering how to ride the "coat tails" of the big banks to maximize, I have something for you that I think you will really appreciate.
To help me get a proper start trading the foreign exchange, I sought out a mentor and went straight to the man from whom I had already learned so much about trading.
That same man recently surveyed over 50,000 traders to find out what their biggest concerns, questions, and challenges were about Forex trading. He took the results of that survey and has put together a 55-page report on the foreign exchange market.
In this report he laid bare the cold, hard reality of the Forex markets...to our benefit.
Here's why...
First, he has provided his answers to the top 20 questions raised in the survey...
More importantly, he also tackles head-on much of the unfounded confusion that seems to plague the public, as well as most Forex traders.
Even better, he has shared a little bit about how he spends just 20 minutes a day to trade the Forex market with TOTAL confidence and peace of mind.
You'll also learn from this report:
I was given an advance copy of the report and was asked to get back to him and comment on what I had read. After reading this report, I figured he would be offering it for sale on his web site in a few days. When I got back with him after reading it, he told me...
The report is not for sale (at least not right now).
You can't purchase a copy.
He is frustrated with the misinformation out there and how new traders get hurt as a result...
That's why he decided to GIVE IT AWAY.
In his own words he says,
To get your copy, just visit this web page right now:
I hope you enjoy the read as much as I did. I've really become interested in Forex and with Think Or Swim adding it to their platform my intrique really peaked. That's what got me studying and working with my trading mentor.
Good Trading,
Christopher Smith
TheOptionClub.com
You know, I just love trading. Luckily, I have become good at it.
There are several people that I consider mentors, from whom I have learned a lot about the markets and how to trade them.
A few days ago, one of my trading mentors released a report on the Forex markets that, it's fair to say, is creating a bit of a stir...
...the reason being is that it challenges everything that that the general public and probably 90% of Forex traders hold to be true.
You already know that I trade equity options. I do not typically trade stocks, however. There are several reasons for that.
For purposes of trading, I, personally, have found Forex to offer several advantages over the equity markets. Those advantages include things like awesome liquidity and unbelievable leverage, and advantages like this are why so many retail traders are getting involved in the foreign exchange market.
There are some real pitfalls, however...
So if you have ANY interest in discovering how to ride the "coat tails" of the big banks to maximize, I have something for you that I think you will really appreciate.
To help me get a proper start trading the foreign exchange, I sought out a mentor and went straight to the man from whom I had already learned so much about trading.
That same man recently surveyed over 50,000 traders to find out what their biggest concerns, questions, and challenges were about Forex trading. He took the results of that survey and has put together a 55-page report on the foreign exchange market.
In this report he laid bare the cold, hard reality of the Forex markets...to our benefit.
Here's why...
First, he has provided his answers to the top 20 questions raised in the survey...
More importantly, he also tackles head-on much of the unfounded confusion that seems to plague the public, as well as most Forex traders.
Even better, he has shared a little bit about how he spends just 20 minutes a day to trade the Forex market with TOTAL confidence and peace of mind.
You'll also learn from this report:
- How to "shake out" the good Forex brokers from the unscrupulous ones. Many brokers won't be prepared when you ask them these 5 questions (page 12).
- His "insiders formula" on how to determine the best mix of technical indicators to use when trading Forex pairs (page 23).
- Step-by-step tactics for applying his "Optimal Profit Exit Strategy". This is one of his favorite ways to enjoy profit-taking as quickly as possible (page 32).
- How he was able to drastically reduce his "time in the trenches" trading Forex by spending only 20 minutes a day. These 2 discoveries made it all possible (page 42).
- ...plus, there's a TON more you'll get to sink your teeth into when you get the report.
I was given an advance copy of the report and was asked to get back to him and comment on what I had read. After reading this report, I figured he would be offering it for sale on his web site in a few days. When I got back with him after reading it, he told me...
The report is not for sale (at least not right now).
You can't purchase a copy.
He is frustrated with the misinformation out there and how new traders get hurt as a result...
That's why he decided to GIVE IT AWAY.
In his own words he says,
"I want to de-mystify the Forex markets once and for all. So I sat down to write this report as if I was under oath, being grilled by an attorney. That's how direct and forthcoming it is."
GET YOUR OWN COPY
To get your copy, just visit this web page right now:
I hope you enjoy the read as much as I did. I've really become interested in Forex and with Think Or Swim adding it to their platform my intrique really peaked. That's what got me studying and working with my trading mentor.
Good Trading,
Christopher Smith
TheOptionClub.com
Thursday, September 6, 2007
Forex Trading Basics
Well, Labor Day has come and gone and the kids are back in school. The market continues to cause some nervousness as uncertainty remains the watch word.
I took some time off the last part of August, and my trading reflected the fact that I was not at the computer each day. Nonetheless, with implied volatility levels inflated I have been having some good success trading credit spreads on the indexes which invariably turn into iron condors as the market rises and falls.
The stock market is not the only game in town, however. A few years ago, I became very interested in the Forex market. It offers some significant advantages over the equity market, but there are also some real pitfalls. While I was relaxing on my short break, I thought I might share some information about the Forex market for those who have found themselves wondering what it is all about.
Forex is an abbreviation for the foreign exchange market, which is the largest financial market in the world. The foreign exchange market is an "over the counter" market, meaning that there is no centralized exchange. Currencies are traded directly through a network of banks and brokers, via an electronic network or through the telephone.
The Forex is a 24 hour market, with the first "trading day" starting at 5:00 p.m. EST on Sunday. Trading starts in Sydney, Australia, then transitions throughout the trading day to other financial centers in the world. From Sydney, the trading next moves to Tokyo, then London, and finally to New York where the trading session "ends" at 5:00 p.m. EST.
While one trading session ends at 5:00 p.m. EST in New York, the next session is getting started in Sydney, at the same time. As such, the Forex market does not actually close.
The most commonly traded currencies include the U.S. Dollar, the Euro, Japanese Yen, British Pound, Swiss Franc, Canadian Dollar, and the Australian Dollar. These currencies are considered the "major" currencies in the Forex market.
Trading in the Forex market involves the trading of currency pairs. One currency for another. The common method of denoting which currencies are being traded utilizes a short, three letter abbreviation for each currency in the pair, separated by a slash. For example, EUR/USD denotes the Euro / U.S. Dollar pair. The other recognized pairs include GBP/USD, USD/JPY, USD/CHF, USD/CAD, and AUD/USD.
These recognized pairs of the major currencies are the most highly traded currency pairs in the the world. They are highly liquid and they are traded on a 24 hour basis. Of the majors, the EUR/USD and GBP/USD are the most prolific.
The order in which the currencies are denoted does have significance. The first three letter symbol identifies the "base" currency while the second three letter symbol identifies the "counter" currency. Quotes are given for the cost of the counter currency against the base. For example, if you are quoted 1.3855 for the EUR/USD you are being told that it will cost you 1.3855 U.S. Dollars to buy one Euro. A quote of 0.8644 on the USD/AUD pair, indicates that one Australian dollar will cost 0.8644 U.S. Dollars.
With the exception of the Japanese Yen, all of the major currencies are quoted out to four decimal points. The smallest unit by which a currency can be quoted is called a "pip." The Yen is quoted out to just two decimal points, so one "pip" for the yen is equal to .01, while a "pip" for any other of the major currencies would equal .0001.
The bid price is the price the market is willing to pay a seller of the currency pair. The ask price is the price the market is willing to sell a currency pair to a buyer.
The difference between the bid and ask price is known as the "bid/ask spread" and the difference between the two is how the market maker is compensated. Because they are compensated from the spread, there is no commission paid for the transaction. The bid/ask spread is not fixed, but will change with prevailing trading conditions.
Lot sizes are 100,000 units for a standard lot and 10,000 for a mini-lot. One pip on a standard lot equals $10. On a mini-lot, one pip is equal to $1.
Forex dealers offer leverage as high as 100:1, sometimes even higher. Assuming 100:1 leverage, 1 standard lot would require $1,000 in margin. A mini-lot would require $100 in margin. If your account value falls below the required margin on a position, the dealer will automatically and immediately close out the trade.
This is just a brief overview of Forex basics. While the Forex market is not something you would want to jump into on a casual basis, it can offer you some tremendous benefits. If you do choose to pursue trading in this market, take the time to first learn more about about how Forex works and how it can be traded safely. With 100:1 leverage, you can lose money just as fast as you earn it.
Good trading!
Christopher Smith
TheOptionClub.com
I took some time off the last part of August, and my trading reflected the fact that I was not at the computer each day. Nonetheless, with implied volatility levels inflated I have been having some good success trading credit spreads on the indexes which invariably turn into iron condors as the market rises and falls.
The stock market is not the only game in town, however. A few years ago, I became very interested in the Forex market. It offers some significant advantages over the equity market, but there are also some real pitfalls. While I was relaxing on my short break, I thought I might share some information about the Forex market for those who have found themselves wondering what it is all about.
Forex is an abbreviation for the foreign exchange market, which is the largest financial market in the world. The foreign exchange market is an "over the counter" market, meaning that there is no centralized exchange. Currencies are traded directly through a network of banks and brokers, via an electronic network or through the telephone.
The Forex is a 24 hour market, with the first "trading day" starting at 5:00 p.m. EST on Sunday. Trading starts in Sydney, Australia, then transitions throughout the trading day to other financial centers in the world. From Sydney, the trading next moves to Tokyo, then London, and finally to New York where the trading session "ends" at 5:00 p.m. EST.
While one trading session ends at 5:00 p.m. EST in New York, the next session is getting started in Sydney, at the same time. As such, the Forex market does not actually close.
The most commonly traded currencies include the U.S. Dollar, the Euro, Japanese Yen, British Pound, Swiss Franc, Canadian Dollar, and the Australian Dollar. These currencies are considered the "major" currencies in the Forex market.
Trading in the Forex market involves the trading of currency pairs. One currency for another. The common method of denoting which currencies are being traded utilizes a short, three letter abbreviation for each currency in the pair, separated by a slash. For example, EUR/USD denotes the Euro / U.S. Dollar pair. The other recognized pairs include GBP/USD, USD/JPY, USD/CHF, USD/CAD, and AUD/USD.
These recognized pairs of the major currencies are the most highly traded currency pairs in the the world. They are highly liquid and they are traded on a 24 hour basis. Of the majors, the EUR/USD and GBP/USD are the most prolific.
The order in which the currencies are denoted does have significance. The first three letter symbol identifies the "base" currency while the second three letter symbol identifies the "counter" currency. Quotes are given for the cost of the counter currency against the base. For example, if you are quoted 1.3855 for the EUR/USD you are being told that it will cost you 1.3855 U.S. Dollars to buy one Euro. A quote of 0.8644 on the USD/AUD pair, indicates that one Australian dollar will cost 0.8644 U.S. Dollars.
With the exception of the Japanese Yen, all of the major currencies are quoted out to four decimal points. The smallest unit by which a currency can be quoted is called a "pip." The Yen is quoted out to just two decimal points, so one "pip" for the yen is equal to .01, while a "pip" for any other of the major currencies would equal .0001.
The bid price is the price the market is willing to pay a seller of the currency pair. The ask price is the price the market is willing to sell a currency pair to a buyer.
The difference between the bid and ask price is known as the "bid/ask spread" and the difference between the two is how the market maker is compensated. Because they are compensated from the spread, there is no commission paid for the transaction. The bid/ask spread is not fixed, but will change with prevailing trading conditions.
Lot sizes are 100,000 units for a standard lot and 10,000 for a mini-lot. One pip on a standard lot equals $10. On a mini-lot, one pip is equal to $1.
Forex dealers offer leverage as high as 100:1, sometimes even higher. Assuming 100:1 leverage, 1 standard lot would require $1,000 in margin. A mini-lot would require $100 in margin. If your account value falls below the required margin on a position, the dealer will automatically and immediately close out the trade.
This is just a brief overview of Forex basics. While the Forex market is not something you would want to jump into on a casual basis, it can offer you some tremendous benefits. If you do choose to pursue trading in this market, take the time to first learn more about about how Forex works and how it can be traded safely. With 100:1 leverage, you can lose money just as fast as you earn it.
Good trading!
Christopher Smith
TheOptionClub.com
Subscribe to:
Posts (Atom)