Currency Trading Concept
The offline foreign currency trading is simple, you have dollars and want to buy euro, so you go to some broker or the bank and buy euro, in this case you need to pay a commission to the broker so you will pay higher value of the real value. Most of the time you will pay at the estimated closing trade value.
Now the online foreign currency trading like the Forex trading, it’s a lot deferent. You will open an account with your own currency and start trading on the changes. You are not buying or selling. Although there is a buy and sell order but its only to determine the direction you are bidding on.
For example, you have opened an account with easy forex with $500 and you start the first deal buying dollars and selling euro, but you did not buy euro first. It’s O.K because you are not buying dollars in real you are biding that the dollar will be in higher value related to the euro. So you are bidding at the change of the currency value.
Let’s say that when you opened your account the ERO/USD (this writing indicate the value of the euro ERO in us dollars USD) was 1.255 (which means 1 euro is worth 1.255 dollars) and you knew that the US dollar will be stronger soon so you sell euro and bid on the 1.200 value. If you were bidding with the full $500 you can earn $275 if the value of the euro reached the 1.200 dollars.
Don’t gamble with options!
Consider this simple scenario.
You’re betting on a horse race and you have a 3:1 favorite and you have a 15:1 outsider.
Which one is the better bet?
Well, bet on the outsider and you have bigger winning potential, but betting on the favorite gives you a better chance of winning.
How often do you see a betting shop go broke?
Not very often they know the odds of success and the betting odds reflect this. It’s obvious! Bet on the favorite.
Currency options and odds
In currency options though traders continually take the outside long shot bet.
They buy options way out of the money with short time to expiry and this means the odds of winning rely on lady luck.
If you want to put the odds in your favor you need to trade options for less potential gains but greater odds of success
See the Best Forex Broker online and start trading with profits using Forex Expert Advisor
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