Hi all

Is FOREX the right option in these days when the stock exchanges are crashing ?

Please expalin

ec

Answer
Playing Forex can appear alluring, but the majority of people who try it lose money. All you have to do is do a web search on the words "Forex" and "lose" to see this is the consensus.

Forex is what we call a "zero sum" game. You are making a bet with someone else about whether a currency will rise or fall. For every winner there has to be a loser. If you are smarter than the average player, you may make money. If you are dumber than the average player, you are likely to lose money. Most of the people making the "bets" in Forex are highly trained professions at banks and other institutions. You are unlikely to beat them at this game.

Actually Forex is not quite a zero sum game. It's a slightly negative sum game as the Forex broker takes a small percentage each time in the spread. It's a small amount but over a hundred trades, it ends up being a considerable amount of money. So the average player is likely to lose money, and remember the average player is a highly trained professional and probably smarter than you.

There is a lot of luck in Forex, and if you play it, you will have some periods of time where you make money. This is usually because you are having a lucky streak, not because you have suddenly become an expert Forex player. However, most people are unwilling to admit their success is due to luck. They become convinced they have a system that works, and lose a lot of money trying to refine it.

I would recommend not trying to do Forex at all, unless you are a trained professional. It's like playing poker with people better than you, with the house constantly taking a small percentage from the pot.

Forex vs Options & ETF's; which would be better to invest on?

I have $3000 to invest, I'm doing research on the mentioned options; which would be better Forex, Options, or ETF's?

Answer
What you have just asked is tantamount to asking :
"Beef vs Fish & Pork, which would be better to eat?"

These are completely different financial instruments that serve very unique and different purposes and it largely depends on what you are trying to achieve. For example, if you want to invest or trade on your opinion that the US dollar will continue to weaken against the Euro, you would of course do FOREX, right? If you want to invest in a certain market or sector movement, you would of course not invest in forex but go for an ETF that represents what you want to speculate in, right?

So, the thing is, it all starts from you, yourself. You need to understand and choose what works for you. There are pros and cons in ALL kinds of financial instruments and people usually specialise deeply in the one that they understand and are able to attain consistent success in.

I know a lot of very rich forex traders and I also know a lot of broke forex traders. I know a lot of very rich option traders and I also know a lot of broke option traders. What is the difference? The difference is knowledge. Those that has deep enough knowledge and experience in a chosen field usually becomes successfull and those lacking of knowledge will usually go broke. The markets is a merciless place where the more knowledge you have, the less risk you will run into.

So if you ask me, the starting point is not in deciding what instrument works for you and trying to gamble your $3000 away but instead continue to invest in more knowledge until you are certain of what you want to do.

I have personally chosen to trade options and have made it my life long career. It has taken me from completely broke to stock market millionaire by the age of 28 and I list some of the books that took me down this path many years ago at http://www.bestoptiontradingbooks.com .

Hope these information helps.



http://www.mastersoequity.com



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Anybody can tell me how forex options affect forex market? Do they actually affect the market only when they are exercised? Does an exercise of a forex option occur at the same time as a sell-off of the option? (My understanding is that when an option expires, you have to exercise it then sell it to make profit)

Answer
Typically, what happens is you will be given the difference between the strike price and the current market price, as clearly the Writer of the Option cannot physically deliver a curreny pair at an older, lesser price than the market. So they owe to indemnify you, or place in you in a financial position similar to that as if you have the currency pair at the current market value.

Now as for option contracts, YOU DO NOT need to exercise them if they are about to expire. That would make no sense, as if they are 'out-the-money' you would lose money. A contract can expire, leaving you out the contract's premium. If you are looking for the best forex software, visit this site

http://the-best-forex-software-in-internet.blogspot.com/

This software is the best software that can help increase your trading profit and user friendly.


Best Wishes,

How many lots does a Forex option represent?

I know that a stock option is a contract that gives the holder the right to buy (or sell) shares, usually 100, but what about Forex options do they give the holder the right to buy (or sell) 100 lots of a currency?

Answer
Most of the FX options are traded in the OTC market. It's huge and it's filled with big players. In fact, the notional size of the OTC options traded in a year is in the 100's of Trillions of dollars. Unfortunately, you can't participate in this market because it's for institutions.

You can buy options on FX futures contracts. In lots of ways these are cleaner anyway, because there is no settlement risk and no counterparty risk. Also a futures contract quotes the forward price of the currency (almost, if you're a pro you will note that there is a subtle difference). The forward price of the currency is the price you could lock in by converting at the current exchange rate and investing in risk-free bonds denominated in the foreign currency. Basically, currency is expected to depreciate in countries with high interest rates relative to currencies from countries with low interest rates. It makes life easier to not have to worry about forward pricing when you are trading options on FX.

Anyway, an option on an FX futures contract gives you the right to buy or sell one futures contract at the strike price. Thus if you exercise an in-the-money call (put) option on an FX futures contract, you get a long (short) position in a futures contract and some money in your margin account. FX futures contracts have well-defined sizes, for example, a contract on the Euro is $125,000.

You need to know that these markets are filled with people with very deep understandings of the options and FX movements and it is unlikely that you will be able to beat them for money.