On the other hand, if you sell options you have a 90% chance of success and if you do it correctly, then you can build huge profits over the longer term.

Below we are going to look at a strategy that has the odds in your favour and maximizes your chances of success when selling premium.

So if the chances of success are so great why don’t more people sell options?

This can be summed up in one word – RISK

On the face of it doesn’t look good taking an unlimited risk to get a limited gain, but of course if you constantly pile up small profits by collecting premium with currency options then you can make big profits – let’s look at how to do this and keep the risk down.

Getting 90% + Odds On Your Side For Huge Gains

If you want to use a currency trading system based around options selling keep the two points below firmly in mind to get the odds even more on your side.

1. Sell Greed and buy fear.

Option premiums become high when a market is driven by greed and fear – these set ups provide you woth a chance to trade and build big profits from your forex trading signals.

So when markets skew a long way from the “fair value” you sell.

The two indicators below are great for spotting contrary trades and are explained more fully in our other articles.

This is the set up you are looking for:

Look for markets that are very bullish or bearish by checking the % bullish indicator and look for below 15% bullish and above 85% to isolate opportunities. Next, look for commercial buying of bear markets and selling of bull markets via the commitment of traders report.

Use your charts to enter and sell options behind the next level of support or resistance.

2. Get time on your side

When you are buying option premium, you want lots of time on your side when you are selling go for the opposite.

Time decay at the end of the life of an option kills it quickly, so use it to your advantage and sell options with short times to expiry.

This is not a game for amateurs

If you want to do a forex trading strategy that includes selling currency options – keep the following in mind:

The above is a simple strategy and it works and it needs courage to do – Selling options is a big boys game and you need to be well capitalized, have strict money management and be prepared to trade against the consensus and the majority of forex traders.

Trade with 90% odds of success

If you can adopt the right mindset, spot the opportunities driven by greed and fear and have the courage to trade them by selling currency options, you can trade with 90% odds of success on your side and pile up huge profits.

When you see entry signals, you have to be quick on your feet to think whether this is a trade that you want to get into or not considering the risks vis-a-vis your forex trading strategy. Taking on the risks sans emotions and sticking to your strategy is often the best way to make forex options trading and currency trading decisions. Do not be too emotional about the way you are trading. Assume the worst but hope for the best is a good tenet to follow. If you believe in your trading strategy, give it a chance to work for you.

Start with low-risk trades to get a feel of the forex market if you are a novice. Sometimes, running after bigger pips can result in missed opportunities and great losses for the forex trade. By keeping your emotions under control you will be able to develop your own trading strategy of spreading out risks, enjoying small pips in the short-term, and planning for long-term pips.

What are the odds you’ll win money in currency trading? No one exactly knows. There is no system in this world that will allow you to pick the right currency all the time. In currency trading, each currency is influence by different forces that are both measurable and immeasurable. No one can guarantee a 100% chance that you’ll profit for every choice you make. With the risk of losing looming around, money management will allow you to account for the probability you’ll lose money.

In currency trading, the amount of money you’ll lose is limited on the lots you purchased. The lots vary from broker to broker. If your lot size is $100, you can only lose $100. Money management in currency trading is how you use your lot. A proper management is dividing the lot and spreading over a period of time. For example, you only invest 10% of your lot until you gain 10 pips. There many money management theories in currency trading available. Find one that best fits your risk profile and needs. Preserving your capital is as important in gaining profits.

At the beginning stage, most of the large companies would carry out their Forex trading via the different banks or even through the major institutes that deal with finances. These institutes had to be the ones that operate internationally. Forex trading has attracted a lot of popularity today because of the presence of modern technology. Via the use of the internet and the increasing telecom market, it is easier to spread messages and to bring across information on issues such as the economic polices worldwide. With the creation of the Forex Software that you can find on the internet, you will easily get the latest news about the Forex trading online. This has actually become a platform that facilitates the exchanges of trading since it makes it easy for you to seize opportunities on the spot and to implement your decisions immediately.

Apart from some problems at the beginning stage, Forex trading on the internet has become more standardized and the people who take part in Forex trading can now get a close to 100% secured access via the different companies that deal with Forex trading. The advantage of using these companies is that they are free from restrictions and give the customers more freedom of choice. As people now become more aware of the usefulness of Forex trading on the internet, it has helped to boost the popularity of advanced technology. Since it has been so successful to trade online, more people are entering this Forex trading platform and as a result, it has become commercially possible to use the Forex Software as a mean for trading exchanges to take place.

Surveys have shown that more and more people are getting involved in Forex trading. People joined for different reasons and in fact, some are even starting it as a hobby. In the conventional Foreign Exchange Market, this was usually dominated by big companies such as banks or Multi National Companies and you don’t get commoners involved apart from brokers. However, now there are many guide books on the trading methodologies, as well as trend analysis, so it will make it easy and safe for any newbies who might want to learn Forex trading online.

If you understand the margin trading concept that you apply in Forex, you can actually save a lot of money on deposits. It refers to the margin that is traded on and this margin differs depending on the banks’ policies but it will always in percentile terms based on the initial amount. How much you are allowed to play in Forex trading depends on what is the original amount given by the bank. The actual potential can be illustrated by the example below. Let’s say a bank has imposed a 2% as the margin deposit. This means you will only have to put in $20000 USD as a deposit in order to trade for two million dollars. As such, you will be able to increase by 200% for your profit. On the other hand, should you be unlucky and loses money in the Forex trading, the margin deposit of 2% will mean a loss of 200% too. Whether you are playing Forex trading online or offline, the rules are the same.

So long as you participate in investments, there will be the impending dangers of profits or losses. As it is, the Forex trader’s luck online can be anywhere between 2 to 25% on an average each day. As a newbie in Forex trading, it is essential that you know that your deposit’s interest rates will change depending on the currencies. As such, most traders play in a few different currencies in the world of Forex, which is what is known as the variable currency and the Base currency. This is applicable both in the conventional mode as well as the Forex online mode. In order to be a successful Forex trader, you will need to have an ability to analyze, a high level of knowledge on the subject and your intuition to act appropriately when the opportunities come. You must also be able to make full use of your Return on Investment (ROI) so as to gain the most profits from this lucrative financial market.

Fixed Odds betting has some big advantages over financial Spread Betting especially for those starting with smaller accounts. With Spread Betting you’re paid by the number of points you are correct by, with Fixed Odds you can make a large return with the market moving just a few points in your favour. Another massive advantage of Fixed Odds over Spread Bets is that you don’t need to worry about using Stops.

Apart from One Touch bets, with Fixed Odds you are buying time, similar to an option, so your bet could be wrong for days or weeks yet by the time expiration comes you can still end up in the money and win. Many traders have the right view on the market but their timing tends to be out and they are stopped out when using a spread bet, only to see their trade move in their predicted direction. By using a Fixed Odd bet this takes away the worries of day to day price spikes.

 

Here are 8 Top Tips for Fixed Odds Trading

1.  You can make money from Up, Down or Sideways movements

With fixed odds you can make money from markets moving up, moving down or staying in a sideways range, a concept that even professional traders find hard to grasp. Even after big falls in the markets in 2008 most traders are still conditioned to want to buy low and sell high.

Remember that markets fall faster than they rise so down bets can make quick profits. With fixed odds you can back currencies, shares and indices to fall all with limited risk and the most you can lose is your stake which can be as low as £10.

Sideways markets can be backed using Barrier Range bets. Until Betonmarkets.com introduced these it was very complicated to make money from range bound markets and you would have had to use options strategies such as selling options. Now you can do it with a simple bet and with strictly limited risk.

You would be surprised how often a currency, share or index actually stays in a range – until recently you could not profit from ranges.

 

2.  Learn to love volatility

With fixed odds, bookmakers such as betonmarkets.com you can place an UP/Down bet which basically means “I don’t know what the market is going to do but I think it’s going to move.”

As long as the market moves Up or Down and breaks above or below your predicted barrier you will be paid out. This bet is ideal after a market has been going sideways in a narrow range for awhile as the odds of a breakout becomes more probable. Those that follow charts can look for contracting triangle formations. As the price squeezes you know at some stage it will breakout normally with a big move. With Up/Down bets you don’t have to predict the direction of the breakout as long as it does breakout within your predetermined time.

Tip: Buy a bit of extra time. We all want our bets to payout as quickly as possible for the highest payout but I suggest taking a slightly lower payout and buying a few extra days of time. So let’s say your offer is 40% for the NASDAQ touching 1550 in 14 days, try going for 18 days, the extra few days have saved me on many of my trades.

 

3.  Use One Touch bets

Markets tend to be like lightening, they look for the path of least resistance.  When a market breaks above a resistance (ceiling) level you will tend to find the market will carry on in the same direction for at least a few more days. Just as a market breaks down through a Support (floor) the market carries on falling until its next support.

Using a One Touch bet traders can back these events, remember you’re saying the market just needs to touch the given level and that would be enough to payout.

So let’s use a recent Gold example. Gold started to build up momentum and broke over the $830 an oz level, looking at the chart I could see $850 was the next potential target, so I placed a ONE TOUCH bet that Gold would touch $850 within the next 14 days. Gold went on to hit $870 within a few days, so the bet paid out. Of course, if Gold did not touch $850 during the 14 days then my bet would have expired worthless.

If I do see the bet going against me and time is running out I can sell the bet back and look to salvage some of the stake.

A quick tip – markets have a tendency to move to round numbers both on the upside and downside, you often see this happen in currencies, indices and individual shares. Look for possible moves to next levels, especially on falling markets, if you look at the way the Dow Jones fell from 9,000 to 8,000 in a matter of days back in October 08 this demonstrates the point.

4. Balance Risk and Reward

Everyone likes the big payouts; however, you have to remember there is a reason why you’re being offered a 300% return, that’s because there is a fairly slim chance that the bet will not payout. On the opposite end a 1% return is hardly going to make you rich and should the bet go wrong you would lose a large stake.  

The simple answer is to look for a balance and mix and match trades. In my own trading I am looking for returns between 40% to 100%.

Tip: Look to tweak your bets. Before you accept the bet you will be shown the odds and asked to confirm whether you’re happy or not. You can adjust the levels and dates and see how this affects your payout.

5. Be a disciplined trader not a reckless gambler

After a good run many become over confident and start taking stupid risks. After a poor run many try to play catch up and want to make their losses back fast, both actions are the easiest way to lose your trading capital. Many books have been written on Money Management with complicated formulas. The key should be that no one trade should ever cause you so much damage financially or emotionally. How every sure you are the XYZ is going to rocket, only a percentage of your trading bank should be risked.

6. Run two bets together, trading a pair

Another strategy is to trade two different markets that have a negative correlation. For example, Gold and the US Dollar. Gold is priced in US$ so if the dollar weakens then Gold tends to rise. Gold is also used as a hedge against falling currency values. So you could look to have a Bear bet on the US$/Euro and a Bull Bet on Gold.

The Japanese Yen and the US stock markets is another pair that can be traded. You may have heard of the Carry Trade, where the Yen is sold as money is borrowed in Yen and then the Yen are converted and invested in higher yielding currencies such as the New Zealand Dollar.

If you look at the Euro/Yen and say the S&P500 you will see that as the Euro/Yen weakens (so money is flowing back to the Yen  which is the funding currency)) as does the S&P500. If you see a funding currency strengthen such as the Yen it means traders are taking less risk which is not good for equity markets.

7.Seasonality – History does repeat itself in many markets

My trading style uses technical analysis with seasonality. Most know what technical analysis is however seasonality is not as well understood. Seasonality is using the calendar and past results to forecast the likelihood of the same happening again. For example, Gold tends to be strong in September where as stock markets tend to be weak. Periods around market holidays such as Christmas, Thanksgiving, Independence Day and the first few days of the month tend to be stronger. The well known saying, “Sell in May and go away,” whilst not perfect, has worked as a good base to a trading system which I used to make large profits in 2008. You will also find seasonality in commodities and some currencies. Watch the Yen strengthen around March time as large Japanese companies close their financial books and tend to put Yen back on their balance sheet.

8.  Combine Spread Bets and Fixed Odds

Let’s say you have a core view that the FTSE100 is going down and you have placed a spread bet to back this idea. After a week or so the FTSE100 starts going up or sideways, you could of course close your spread bet or you could leave it open and look to place a fixed odds bet to run along side it, maybe a barrier range, so whilst the market is going sideways your spread bet will not be making money but at least your fixed odds will make a profit.

Are you missing out?

Many using Financial Spread Bets or CFD’s have a tendency to look at fixed odds as a poor mans options market or haven’t treated it as a serious trading platform. 

Fixed Odds financials are now over 10 years old and have come along way and offer both small and not so small clients a way to back markets in unique ways. I have personally used Betonmarkets.com since 1999 and have traded a good few million pounds worth of bets during the last few years. I can assure you that it’s a serious trading vehicle that can compliment both spread betting and other forms of investing and its popularity will continue to grow. You can open a fixed odds account within minutes and start trading with as little as £25.

Vince Stanzione has been trading markets for over 23 years. He now trades his own accounts as well as teaching others and is the author of “Making Money from Financial Trading.” For more information go to www.fintrader.net

Options trading actually act as a best means to earn money. It is more like giving out cash in exchange for potential profit. You buy assets or things of value, with hopes of producing income in the end. It is available as either a Call or a Put, depending upon whether they give the right to buy, or the right to sell. The Call options give you the right as a holder to buy the underlying commodity, and Put options provide you the right to sell the underlying commodity. However, be it a call or put option, it can be bought or sold on registered exchanges. You deal with buyers and sellers of options/stocks, hoping to bring in more profits.

The best part about Options Trading is that you can have a better control on both the probability of risk and the consequence of risk. In stock trading, you cannot actually control the prospect of loss because you win only if the stock goes up. But option trading reduces the probability of danger as there are options strategies that profit when the stock goes up, down and sideways all at once. Besides this, it also reduces the consequence of risk through leverage.

Today, certainly the success in options trading is determined by price movements and investor’s attention to either volatile or commodity stocks. Proper control using bear market options trading strategies can certainly put extra cash in your pockets. Moreover, it can further give you the edge when the next bull market occurs.

How much money do I need to start?

One of the beautiful things about options trading is it’s one of the few businesses that you can take for a free test drive to see if you can be successful at it. By trading in a simulator you can start your business with no money. Obviously you won’t be earning anything either, but you will be gaining valuable knowledge. You can find a simulator at CBOE.com. After you’ve traded in the simulator for a few months and become consistently profitable you can start with as little as $2,000.

Finding a broker

The first step in getting started in an options business is finding a broker. There are many (excuse the pun) options available, a few of the good ones include, OptionsXpress, TradeStation and Interactive Brokers. These are all members of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC), which are two organizations that protect you against fraud from financial brokers.

Putting the Odds in your favor

While this isn’t a comprehensive list there are a few things that you can do to stack the odds in your favor when dealing in stock options. First of all rather than buying puts and calls you can use credit spreads. This method of selling a higher priced option and purchasing a lower priced option alone will stack the odds enormously in your favor simply because this method can allow you to make money whether the markets go up, down or sideways. As a matter of fact using this method can allow you to win as much as 80-90% of the time, which is why professional traders use this type of trade to generate consistent income. The next thing you want to do is a bit of technical analysis and look at the S&P stock index. If the index is moving above it’s 200 day moving average you generally want to be purchasing stocks or using bull put credit spreads. If the index is moving below it’s 200 day moving average you should short sell stocks or use bear call spreads. How much can I earn? This can fluctuate depending on market conditions but by using credit spreads you can make anywhere from 5-20% a month. So with $10,000 you can generate anywhere from $500-$2000 in extra income a month.

Reducing Your Risk

1.Start off by trading in a simulator at CBOE.com

2.Always use a stop loss or have your positions hedged.

3.Never trade with money that you need to pay for you day to day expenses with such as rent and bills. Nervous money always loses.

If you’d like to find out more about options trading and credit spreads click on the link in the resource box below and sign up for a free 10 part course.