Sunderland Traders’ Guide: Forex Trading And Mining Tips For Easy Profits


Sunderland Traders’ Guide: Forex Trading And Mining Tips For Easy Profits – Currency options are relatively unknown in the retail currency world. Although some brokers offer this alternative for spot trading, most do not. Unfortunately, this means that investors lose out.

FX options can be a great way to diversify and even diversify an investor’s investment position. Or, they can also be used to speculate on the long-term or short-term outlook of the market rather than trading in the forex market.

Sunderland Traders’ Guide: Forex Trading And Mining Tips For Easy Profits

Sunderland Traders' Guide: Forex Trading And Mining Tips For Easy Profits

The trading structure in currency options is actually very similar to that in stock options. Leaving complex models and math aside, let’s look at some basic FX option setups used by both novice and experienced traders.

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Basic options strategies always start with plain vanilla options. This strategy is the easiest and simplest trade where the trader buys a live call to express a directional view of the exchange rate.

Placing an open or bare option position is one of the easiest strategies when it comes to FX options.

The AUD/USD chart is showing a double top, which is ideal for a put option. Image by Sabrina Jiang © 2020

Looking at the chart above, we can see resistance forming below the key 1.0200 AUD/USD low in early February 2011. We confirm this with a double top technical formation. This is a good time to choose an option. An FX trader who wants to short the Australian dollar against the US dollar simply buys a plain vanilla option like the one below:

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The profit potential for this business is endless. But in this case, the trade should be set at 0.9950 exit – the main support barrier for a maximum profit of 250 pips.

In addition to plain vanilla option trading, an FX trader can also create spread trades. Spread trades are preferred by traders, are a bit more complicated, but they get easier with practice.

The first of these spread trades is the debit spread, also known as a bull or bear put. Here, the trader believes in the direction of the exchange rate, but wants to play it a little safer (with a little less risk).

Sunderland Traders' Guide: Forex Trading And Mining Tips For Easy Profits

In the chart below, we see the 81.65 support level that formed in the USD/JPY exchange rate in early March 2011.

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This is a perfect opportunity to place a bull call spread as the price level is likely to find some support and move higher. The implementation of the debit bull call spread would be:

If the USD/JPY exchange rate crosses 82.50, the trade will make a profit of 52 pips (100 pips – 48 pips (net debit) = 52 pips)

Reward by spreading while maintaining business direction. This strategy is sometimes referred to as a bull or bear call spread.

With support at 81.65 and the bullish outlook for the US dollar against the Japanese yen, a trader can apply a bullish strategy to capture any upside potential in the currency pair. So, the business is divided as follows:

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As anyone can see, this is a great strategy to implement when a trader is high in a bear market. Not only does the trader gain from the option premium, but they also avoid having to use any real cash to exercise it.

So what if a trader is neutral on the currency but expects a short-term change in volatility? Similar to comparable stock options games, forex traders will build an option trading strategy. These are great trades for an FX portfolio in order to catch a potential breakout move or slow stop in the exchange rate.

It is a little easier to set up compared to a spread credit or debit trade. In a straddle, the trader knows that a breakout is imminent, but the direction is unclear. In this case, it is better to buy both the call and the phone to record the defeat.

Sunderland Traders' Guide: Forex Trading And Mining Tips For Easy Profits

The volatility of the USD/JPY exchange rate in February 2011 provides an excellent opportunity. Image by Sabrina Jiang © 2020

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As seen above, USD/JPY fell to just below 82.00 in February and remained within the 50-pip range for the next several sessions. Will the spot rate continue to be lower? Or will this consolidation come before a move higher? Since we don’t know, the best care is to use a straddle like one of the following:

It is very important that the strike price and expiration date are the same. If they are different, this can increase the cost of the trade and reduce the probability of making a profit.

The potential benefits are endless – similar to the vanilla option. The difference is that one of the options ends up being worthless, while the other can be bought for a profit. In our example, the put option ends up worthless (-45 pips), while our call option increases in value as the spot price rises just below 83.50 – giving us a net profit of 55 pips (a profit of 150 pips – 95 pip option premiums = 55) pips).

Forex options are an excellent trading and investment tool. Not only can an investor use a plain vanilla call or put for a hedge, they can also resort to speculative trading when picking up the direction of the market. However you use them, currency options are another versatile tool for forex traders.

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The offers that appear in this table are from partners who receive compensation from them. This compensation may affect how and where listings appear. does not include all the offers available in the market. Getting started in the forex market can often lead to a life cycle that involves diving in head first, giving up, or taking a step back to do more research and open a demo account for practice. From there, new traders can open another live account, experience more success, and break even or profit. Therefore, it is important to have a framework for trading in the currency markets, which we describe below.

Why do we focus on medium-term trading rather than long-term or short-term strategies? To answer this question, let’s look at the following comparison table:

A trader who wants to open and close trades within minutes and often takes advantage of small price movements with a large amount of leverage

Sunderland Traders' Guide: Forex Trading And Mining Tips For Easy Profits

Larger capital requirements and/or risk are more significant due to the large amount of leverage required to profit from such small moves and the spread costs

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A trader typically wants to hold a position for one or more days, often taking advantage of opportunistic technical situations.

Now, you will see that both short-term and long-term traders require a lot of capital – the first type needs it to generate enough leverage and the other to cover volatility. Although these two types of traders exist in the market, they are made up of high net worth individuals, asset managers or larger institutional investors. For these reasons, retail traders are most likely to succeed using a medium-term strategy.

The framework presented in this article will focus on one central concept: trading with probability. To do this, we look at different methods at several times to determine if a given trade is worth it. But remember, this is not intended as a mechanical/automated trading system; but a voluntary system. You can act on the signals you observe or ignore them. The key is when all (or most) technical signals point in the same direction. These high probability trading situations will, in turn, generally be profitable.

We will use the free MetaTrader program to illustrate this trading strategy; but many other similar programs can be used that produce the same results. There are two main requirements of a trading program:

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Now we will look at how to configure this strategy in our chosen trading program. We also define a set of technical indicators with their associated rules. These technical indicators are used as a filter for your trade.

If you choose to use more of the indicators shown here, you will create a more reliable system that creates fewer trading opportunities. Conversely, if you choose less indicators than those shown here, you will create a less reliable system that will create more trading opportunities. Here are the settings we will use for this article:

Now you want to enter using some subjective criteria, such as the following:

Sunderland Traders' Guide: Forex Trading And Mining Tips For Easy Profits

The key to finding entry points is to look for times when all the indicators are in the same direction. Any time signal should support the time and direction of the trade. There are several special points of high and low income:

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It is also a good idea to place exit points (both stop loss and take profit) before placing a trade. These points should be placed at key levels and only changed if there is a change in the building for your business (often as a result of the foundations being put into operation). You can place these exit points at basic levels, including:

Let’s look at some examples of using individual charts

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