Forex options are contracts that give the trader the right trade currency pairs and commodities in the financial market. This Forex options trading gives the retail trader a unique opportunity to trade in the forex market with great flexibility.
Options trading can be very tricky in some aspects and is divided into two types.
- Traditional options
- SPOT (Single Payment Option Trading)
With all the lucrative opportunities in the financial markets why are these options are so popular for many traders? There are three major factors behind the popularity of options trading.
- The risk is predefined and limited to a great extent.
- Huge profit potential when it comes to risk reward ratio.
- Flexibility to set your own price and termination period of a trade.
SPOT or Single Payment Options Trading comes with a diverse functionality so that traders can make a profit in the financial market based on offered choices.
Most Common Options Trading Types
One-touch SPOT – Your account is funded when the price adheres a specific level
No-touch SPOT – Your account is funded if markets do not hit a specific price level.
Digital SPOT – Your account is funded if markets hits a specific price level.
Double one-touch SPOT – Your accounts get funded if markets do not hit one of two price levels
Double no-touch SPOT – Your accounts get funded if markets do not hit either of two price levels.
Sounds great! Let’s start options trading! Not so fast, still there is risk associated with the trading option.
Drawbacks of option trading
- Risk reward ratio varies with the premium.
- There no turning back in options trading. Its means no hedging.
- Predicting the exact time of price movement sometimes becomes very hard
- High volatility may cause some noise in the market to strike out open orders early.
Depending on all these factors, option trading is one of the most profitable instruments for traders provided with proper knowledge of risk management and technical parameters. A significant amount of profit can be made trading options before a major economic release. But it’s always better to equip yourself first by trying a demo account early in your trading. Build your confidence first and then take a chance in the live market.