By Jason Ng

After spending much time explaining the differences between options trading and futures trading to beginners to derivatives trading, I think its time to touch on the similarities between options trading and futures trading. Is options trading and futures trading really that different? What are some of the similarities? Well, there are actually four main areas in which options and futures are similar.

First of all, options and futures are both derivative instruments. This means that they are both merely contracts that allows you to trade their underlying asset at certain specific prices, hence deriving their value from price movements of their underlying asset. Both options and futures are merely contracts that bind the exchange of the underlying asset at a specific price. Without an underlying asset, options and futures would not have any value for their existence at all, which is why they are known as ‘Derivative Instruments’. Options and futures both exist for the purpose of facilitating the trading of their underlying asset.

Secondly, both options and futures are leverage instruments. This means that both options trading and futures trading give you the ability to control the price movement on more of their underlying assets than your cash would usually allow. For instance, a futures contract with an initial margin requirement of 10% would allow you to control ten times the amount of its underlying asset than your cash would normally allow you to. A call option asking for $1.00 on a stock that is trading at $20 has a twenty times leverage as it allows you to control a stock worth $20 with only $1. Leverage also means that you could make more profit with options and futures on the same move on their underlying asset than you would if you bought the underlying asset with the same amount of cash. Of course, leverage cuts both ways. You could also potentially lose more than you would in options and futures trading than you would if you had simply bought the underlying asset.

Thirdly, both options and futures can be used for hedging. Hedging is one of the most important usages of derivatives. Both futures and options can be used to partially or totally hedge the directional price risk of an asset even though options are more versatile and precise as it allows for what is known as delta neutral hedging which allows a completely hedged position to still profit should the underlying asset stage a strong breakout in either direction. The hedging power of options and futures is also extremely important in reducing the downwards pressure faced by the overall market during market crisis because big funds and institutions can hedge the downside risk of their holdings using options and/or futures instead of selling their shares in order to maintain their account value. By reducing the amount of selling these big funds does, downside pressure in the overall market is partially relieved. Of course, this alone does not stop bear markets from forming when the general retail crowd (aka the ‘Herd’) starts to rush out of the market.

Fourthly, both options and futures can be used to profit in ways other than the price movement of the underlying stock itself. Futures spreads can be used to speculate in seasonal price differences between the price of futures contracts of different expiration months and options spreads can be structured to profit from time decay no matter which way the underlying asset goes. Yes, it is these options strategies and futures strategies that make derivatives trading so interesting and so rewarding for people with the knack for mathematical calculations and strategies.

So, even though options and futures are very different derivative instruments and have very different rules and trading characteristics, they are still very much the same in the above areas and you can be a more comprehensive and savvy trader or investor by understanding how to use both options and futures to your advantage.

About the Author: Jason Ng is the Founder and Chief Option Strategist of Masters ‘O’ Equity Asset Management and author of Optiontradingpedia.com and Futurestradingpedia.com. Learn more about

Options Trading

and

Futures Trading

.

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Today, when the whole world is trying to recover from the ill effects of recession, common man is the worst sufferer. At this adverse situation, even the hope to earn a good amount of money through excellent paying job is like a day dream. So what is the alternative to earn in this harder time?

There are many answers to the above question but the best one is undoubtedly earning through forex secret trading. It refers to the secrets to do well in the Foreign Exchange Stock Market trading (FOREX).In simpler words, it means knowledge about the transactions related to buying and selling of currencies that can yield great returns in the form of profits.

Though it looks quite similar, but still there are some points to be kept in mind to make money through this type of business. To begin with, it is important to have complete and updated knowledge of the market. In addition, the person must also have the good knowledge of forex trading.

For gaining knowledge of forex trading, the person can take the help of various e-books available over the Internet as well as buying the books through the nearby book store. With other things, it is also important to have the knowledge of some good forex software that can do wonders for the person. However, it is again essential to go only through the genuine software as otherwise it can result to unwanted loss and troubles after wards.

For making good money out of forex secret trading, it is also important to keep an eye on the market situation, changing trends, interest and above all capital management.

With this crucial information, the chances are more that a person can earn a good amount of money through this type of trading in spite of adverse economy conditions.

Well, it all starts with obtaining the right strategy!

In this guide, we will explore the advanced Forex trading strategy with you.

You will understand to use effective action techniques in a stress-free and uncomplicated Forex trading strategy.

The Ultimate Guide To Forex Trading

This article will look at Forex trading for beginners. Moreover, it will introduce some simple Forex trading strategies.

In particular, this piece will guide you all through key Forex trading strategies that beginners can use.

Before anything else, let us know first the definition of trading strategy and how it is processed.

What Is A Trading Strategy?

A trading strategy in finance is the approach of buying and selling in markets. It is based on predefined rules applied to make trading decisions.

Understanding Trading Strategies

A trading strategy comprises of a well-considered investing and trading plan. It is the one that identifies investing objectives, risk tolerance, time horizon along with tax implications.

Meanwhile, some ideas and best practices are in need to be researched and implemented then followed to.

Development for the trading strategy incorporates expanding methods. The techniques include buying or selling stocks, bonds, ETFs or further investments and may widen to additional complex trades such as options or futures.

On the other side, placing trades implies working with a broker or broker-dealer.

In addition, it is also pinpointing and overseeing trading costs comprising spreads, commissions, and fees.

Once the trading is on execution, trading positions are being examined and managed, as well as adjusting or closing them as needed.

However, risk and return are also on measure along with the portfolio impacts of trades.

The longer-term tax outcomes of trading are a major factor. They may further encompass capital gains or tax-loss gathering strategies to offset gains with losses.

Moreover, the Forex market has hundreds of various trading strategies. Want to be aware of what are the best Forex trading strategies for beginners? First things first – what is a trend?

Understanding A Trend

Basically, a trend is the tendency for the market to remain moving in a given general direction.

A trend-following scheme efforts to produce buy and sell signals. These are the ones that align with the establishment of new trends.

There are several methods designed to distinguish when a trend starts and ends. Many of the simple Forex trading strategies that operate have similar methods.

To add, trend following can generate significant profits.

In fact, there are traders who have yielded outstanding track records making use of such systems.

On the other side, there are also some shortcomings to these strategies.

Below you will find out the disadvantages of utilizing such strategies:

• They are tricky to stick with

• Huge trends can be infrequent

• The conditions that denote the potential beginning of a trend, are not frequent.

Three Beginner Forex Trading Strategies

The initial two strategies we will show you are relatively similar. It is for that reason that they make attempts to follow trends.

However, the third strategy attempts to turn a profit from interest rate differentials, rather than market direction.

1. Breakout

A breakout is any price movement outside a specified support or resistance area. The breakout can take place at a horizontal level or a diagonal level. The position is depending on the price action pattern.

Is Breakout Trading Profitable?

You can have vast profit potential if the breakout happens to the upside. It is for that reason that you got it at a way better price than anyone who purchased at the breakout price. Since you’re buying the lowest of the range your stop loss can be positioned just below your entry, so the risk is minimal.

Moving Average Crossover

Moving averages are one of the most commonly managed technical indicators in the forex market. They have turned out to be an essential part of many trading strategies. It is because they’re simple to use and apply.

The two main types of moving averages are:

• Simple Moving Averages (SMA)

• Exponential Moving Averages (EMA)

Both SMA and EMA are averages of a specific amount of data over a prearranged period of time. Meanwhile, Simple Moving Averages aren’t subjective towards any specific point in time. On the other side, Exponential Moving Averages put a larger emphasis on more recent data.

Carry Trade

Carry trading is one of the easiest strategies for currency trading that exists. A carry trade is when you purchase a high-interest currency versus a low-interest currency. For each day that you take in a trade, your broker will compensate you for the interest difference between the two currencies. It remains as long as you are trading in the interest-positive direction.

How Does Carry Trade Works?

A carry trade is when you make use of a currency that has a low-interest rate, then spend that money to purchase another currency that pays a greater interest rate. You make money on the difference between the interest rates.

Final Thoughts

We hope that you have discovered this introductory guide to Forex trading strategies for beginners useful.

Bear in mind that the standards we have shared mainly aim to get you believing about the philosophies involved. Don’t abide by a strategy without testing it first.

Feel free to put your experiment strategies to see if they will really bring profit to you.

Always remember to have a small starting amount so you don’t lose a huge portion of your investment.

Lastly, don’t forget to regularly check out educational articles for more helpful insights, courses, and tutorials.

Submitted by: Paul Hamilton

For a new Forex trader, the complexities of the Forex market can really be daunting with its own terminologies and its conventions. For example, currencies traded on the Forex market are denoted in terms of pairs with symbols like EUR/USD or GBP/USD. If novice Forex traders are unfamiliar with terms like this, they will not be able to trade properly at all. Nevertheless, over the past few years as more and more retail investors venture into the Forex market, there is also a simultaneous growth in the education industry for the Forex market. Today, there is a proliferation of websites on the internet that are solely dedicated to educating newcomers to the Forex market. Some are totally useless while others are informative making the task of selecting the right Forex course as challenging as trading Forex.

Irrespective of the confusions that arose from the myriad of websites offering Forex trading courses, novice traders cannot avoid the need to educate themselves about the current trends and techniques used in the Forex market in order to trade profitably. A Forex trader can only advance his level of skill in stages and there are basically five stages of skill levels that he has to go through. As a beginner, he will initially learn the basics of Forex trading and trade virtually with a demo account to get the feel and some experiences about Forex trading.

The next two stages of the Forex trader skill advancement are the advanced beginner level and competent trader level stages. He will move from trading with virtual money to trading with real money and trying to establish a positive return. The last two stages involve being a proficient trader and being an expert trader. Here, a trader will rely on his own expertise to decide when to execute a trade until he reaches a level that all these tasks become a second instinct.

Some of the guidelines that can help a beginner select the correct Forex trading courses is by looking at the following criteria:

The Quality of content

Value for Money

The effectiveness of the Forex trading course

The Feedbacks from other traders that had undergone the course

In addition to the above criteria, beginners should always bear in mind that nothing is free in this world. Although the internet is full of free information, at the end of the day, you get what you pay for. Free information will be always be at the value it stand for. Then again, the most expensive doesn t necessarily mean it is also the best. A $10,000 Forex seminar could actually be delivering less information than a $25 dollar book. This is due to the fact a substantial amount of money that you paid for could be used for marketing rather than the paying for the cost of the content.

How successful you in Forex trading will depend a lot on your judgment. Likewise, choosing a good Forex trading course will also require the same approach. And the fact is, good judgment can only be derived from experiences.

About the Author: If you are Interested in learning more about

forex trading

then visit us at

forextradingsystems.com.au

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