To trade with and without expiration – What should you know

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To trade with and without expiration – What should you know

You will find a high number of trading instruments in the IQ Option trading platform and that many of options can be confusing to novice traders because they don’t see the differences.

As soon as you discover the basic principle of each of them, the whole process of trading becomes much easier for you.

One very basic feature that you should know about trading instruments is the presence (or absence) of expiration time. In this article, we take a look at the differences between trading with and without expiration time. Let’s go!

Trades with Expiration

You can find the expiration time on the IQ Option’s FX Options. Which is IQ Option’s own developed financial instrument. The expiration time is the time between purchasing the option contract and its closing time. The expiration time varies, with the FX Option featuring a 1 hour expiration time.

The principle behind time-bound trading is to allow for shorter waiting times for trades and collect a payout percentage based on the investment amount. You will also find the strike price (what is strike price?) which sets the results of the deal. If the trade comes with a longer expiration time, it means that there’s a big chance that the asset will meet the strike price or even exceed this limit. To trade, just select the amount, your strike price, and the direction of the price whether it will go up or down. There is no Stop Loss feature here which means that your deal will close at the appointed expiration.

Another interesting feature that you can use in IQ Option platform is the buyback feature. This will allow you to end the deal before the appointed expiration time. This is helpful for traders who don’t want to wait for the expiration. Note the ‘Sell’ button with profit numbers listed beside it.

FX Options sell button

Another important term you should know is your ‘expected profit’ which is the result of the deal after the expiration. You should also note the ‘profit after-sale’ which refers to the result of your deal if you use the ‘Sell’ button. If you click ‘Sell’, it will permanently close the transaction.

Trades Without Expiration

Some of the popular assets that you can trade without expiration on IQ Option platform are CFDs, forex, stocks, Indices, crypto, ETFs, and commodities. To participate in a trade, you need to choose the amount you are willing to invest, leverage, set the Take Profit and Stop Loss and identify the movement of the price.

You have the option to leave the deal open for a certain period of time based on your trading strategy. You can also look for the current loss or profit on your screen or close the trade using button ‘Close’.

In these types of trading instruments, you can’t expect fixed payouts. In short, the payout that you will receive will depend on the asset price, multiplier, and investment amount.

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There are a number of differences between trading with expiration and without expiration. Each type of trade has its own set of benefits so choose which will fit your trading lifestyle.

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Author

More about the author J. Pro

Unlike Stephen (the other author) I have been thinking mainly about online business lately. I wasn’t very successfull with dropshipping on Amazon and other ways of making money online, and I’d only earn a few hundreds of dollars in years. But then binary options caught my attention with it’s simplicity. Now I’m glad it did because it really is worth it. More posts by this author

How to Trade Forex on News Releases

One of the great advantages of trading currencies is that the forex market is open 24 hours a day, five days a week (from Sunday, 5 p.m. until Friday, 4 p.m. ET). Since markets move because of news, economic data is often the most important catalyst for short-term movements. This is particularly true in the currency market, which responds not only to U.S. economic numbers, but also to news from around the world. Here, we look at which economic numbers are released when, which data is most relevant to forex traders, and how traders can act on this market-moving information.

Which Currencies Should Be Your Focus?

With at least eight major currencies available for trading at most currency brokers, there is always a piece of economic data slated for release that forex traders can use to make informed trades. In fact, seven or more pieces of data are released almost each weekday (except holidays) from the eight major most-followed countries. So for those who choose to trade news, there are plenty of opportunities. The eight major currencies are familiar to most traders:

1. U.S. dollar (USD)
2. Euro (EUR)
3. British pound (GBP)
4. Japanese yen (JPY)
5. Swiss franc (CHF)
6. Canadian dollar (CAD)
7. Australian dollar (AUD)
8. New Zealand dollar (NZD)

And there are many liquid currency pairs derived from the eight major currencies:

Currencies that can be easily traded span the globe. This means that you can handpick the currencies and economic releases to which you pay particular attention. But, as a general rule, since the U.S. dollar is on the “other side” of 90% of all currency trades, U.S. economic releases tend to have the most pronounced impact on forex markets.

Key Takeaways

  • Economic data tends to be one of the most important catalysts for short-term movements in the forex market.
  • Since the dollar is one side of many currency pairs, U.S. economic releases tend to have the most pronounced impact.
  • The most common way to trade forex on news is to look for a period of consolidation ahead of a big number and trade the breakout on the back of the number.
  • A variety of exotic options are available for traders who want to capture a breakout move, but with less volatility than trading the currency pair itself.

Trading news is harder than it may sound. Not only is the reported consensus figure important, but so are the whisper numbers (the unofficial and unpublished forecasts) and any revisions to previous reports. Also, some releases are more important than others; this can be measured in terms of both the significance of the country releasing the data and the importance of the release in relation to the other pieces of data being released at the same time.

When Are Key News Releases?

Figure 1 lists the approximate times (Eastern Time) of the most important economic releases for each of the following countries. These are also the times that players in the forex market pay extra attention to the markets, especially when trading based on news releases.

Country Currency Time (EST)
U.S. USD 8:30 to 10 a.m.
Japan JPY 6:50 to 11:30 p.m.
Canada CAD 7 to 8:30 a.m.
U.K. GBP 2 to 4:30 a.m.
Italy EUR 3:45 to 5 a.m.
Germany EUR 2 to 6 a.m.
France EUR 2:45 to 4 a.m.
Switzerland CHF 1:45 to 5:30 a.m.
New Zealand NZD 4:45 to 9 p.m.
Australia AUD 5:30 to 7:30 p.m.

Figure 1: Times at which various countries release important economic news

What Are the Key Releases?

When trading news, you first have to know which releases are actually expected that week. Second, knowing which data is important is also key. Generally speaking, the most important information relates to changes in interest rates, inflation, and economic growth, like retail sales, manufacturing, and industrial production:

1. Interest rate decisions
2. Retail sales
3. Inflation (consumer price or producer price)
4. Unemployment
5. Industrial production
6. Business sentiment surveys
7. Consumer confidence surveys
8. Trade balance
9. Manufacturing sector surveys

Depending on the current state of the economy, the relative importance of these releases may change. For example, unemployment may be more important this month than trade or interest rate decisions. Therefore, it is important to keep on top of what the market is focusing on at the moment.

How Long Does the Effect Last?

According to a study by Martin D. D. Evans and Richard K. Lyons published in the Journal of International Money and Finance (2004), the market could still be absorbing or reacting to news releases hours, if not days, after the numbers are released.

The study found that the effect on returns generally occurs in the first or second day, but the impact does seem to linger until the fourth day. The impact on the flow of buy and sell orders, on the other hand, is still very pronounced on the third day and is observable on the fourth day.

How to Actually Trade News?

The most common way to trade news is to look for a period of consolidation or uncertainty ahead of a big number and to trade the breakout on the back of the news. This can be done on both a short-term basis (intraday) or over several days. Let’s look at the chart in Figure 2 as an example. After a weak number in September, the euro was holding its breath ahead of the October number, which was to be released to the public in November.

In the 17 hours before the release, EUR/USD was confined within a tight 30-pip trading range. (A pip is the smallest measure of change in a currency pair in the forex market, and since most major currency pairs are priced to four decimal places, the smallest change is that of the last decimal point.) For news traders, this would have provided a great opportunity to put on a breakout trade, especially since the likelihood of a sharp move at this time was extremely high.

The table above illustrates shows—with two horizontal lines forming a trading channel—the indecision and uncertainty leading up to October non-farm payroll numbers, which were released in early November. Note the increase in volatility that occurred once the numbers were released.

We mentioned earlier that trading news is harder than you might think. Why? The primary reason is volatility. You can be making the right move but the market may simply not have the momentum to sustain the move.

Let’s look at the chart in Figure 3 as an example. This chart shows activity after the same release as the one shown in Figure 2 (but on a different time frame) to show how difficult trading news releases can be. On Nov. 4, 2005, the market had expected a payroll increase of 120,000 jobs, but instead the U.S. economy gained only 56,000 jobs. The disappointment led to an approximately 60-pip sell-off in the dollar against the euro in the first 25 minutes after the release.

However, the dollar’s upside momentum was so strong that the gains were quickly reversed, and an hour later, the EUR/USD had broken its previous low and actually hit a 1.5-year low against the dollar. Opportunities were plentiful for breakout traders but bullish momentum in the dollar was so strong that such a bad payrolls number failed to put a sustainable dent in the currency’s rally. One thing you should keep in mind is that, on the back of a good number, a strong move should also see a strong extension.

The chart above shows that, while the worse-than-expected non-farm payroll numbers sent the EUR/USD rate upward for a short period of time, the strong momentum of the U.S. dollar was able to take control and push higher. Keep in mind, when the EUR/USD rate falls, the U.S. dollar is going upward, and vice versa.

Trading News With Exotic Options

One potential answer to capturing a breakout in volatility without having to face the risk of a reversal is to trade exotic options. Exotic options generally have barrier levels and will be profitable or unprofitable based on whether the barrier level is breached. The payout is predetermined and the premium or price of the option is based on the payout. The following are the most popular types of exotic options to use to trade news releases:

A double one-touch option has two barrier levels. Either one of the levels must be breached prior to expiration in order for the option to become profitable and for the buyer to receive the payout. If neither barrier level is breached prior to expiration, the option expires worthless. A double one-touch option is the perfect option to trade for news releases because it is a pure non-directional breakout play. As long as the barrier level is breached—even if the price reverses course later—the payout is made.

A one-touch option only has one barrier level, which generally makes it slightly less expensive than a double one-touch option. The same criterion holds—the payout is only made if the barrier is breached prior to expiration. This is a good option to buy if you actually have a view on whether the number will be stronger or weaker than the market’s consensus forecast.

Options on currencies are a viable alternative for those who do not care to get whipsawed in the markets by undue volatility before they actually see the spot price move in their desired direction; there are different types of currency options available through a handful of forex brokers.

A double no-touch option is the exact opposite of a double one-touch option. There are two barrier levels, but in this case, neither barrier level can be breached before expiration—otherwise the option payout is not made. This option is great for news traders who think that the economic release will not cause a pronounced breakout in the currency pair and that it will continue to range trade.

What You Need to Know to Start Day Trading

5 Tips to Get You Started

Youst / Getty Images

Starting to day trade isn’t a decision to be taken lightly. It is possible to be successful and earn a good living trading only a few hours per day, but that goal is many months away for people just starting out. The first year is tough; there are lots of ups and downs, and your first realistic goal should be simply not to lose everything. If you still want to start day trading, there are five things you need to do in order to put yourself on the right path.

1. Create or Learn a Strategy

Day trading isn’t something to do on a whim. It requires a sound and rehearsed method that gives you a statistical edge on each trade you make.

Start by watching live charts (available for free) of an asset move. As you watch, ask yourself:

  • How would you get into a trade?
  • How would you get out (for both winning and losing trades)?
  • How much would you risk on the trade and what position size would you take (how many shares of stock, lots of currency, or futures contracts)?
  • After deciding all this, what are the odds the trade will be profitable? And if you take similar types of trades 100 times, what tendencies does your strategy show?

The only way to answer these questions is by implementing the same method over and over again and monitoring the results. You can create a strategy by finding tendencies in the daily price action of an asset, or you can learn a strategy from someone else.

2. Practice a Lot

Practicing is key in day trading. Even at a minimum-wage job, the boss usually makes you practice what you are supposed to do before you do it for real. With thousands of your hard-earned dollars at stake, practice is extremely important. Yet, new day traders rarely practice.

To get started, practice in a demo account before you risk a single real dollar. Do so methodically, trading your created or learned strategy over and over again. What you will find is that no two trades are ever exactly the same. Today may be volatile, while tomorrow is sedate. Today is trending, while tomorrow is ranging. If you don’t practice, you may miss trade signals or be inclined to make trades that aren’t part of your strategy.

Practice only the strategy you are working on. Know it well and perfect it. Once you add the pressure of trading real capital, you don’t want to still be thinking about whether you should take a trade or not.

Practice until you have been profitable in a demo account for several months. Only then consider opening a live account with real capital.

3. Know the Capital Requirements

Capital to a day trader is like inventory to a store owner. You need it to operate, and how much you have—and how you manage it—will determine your income.

You legally need $25,000 to start day trading stocks in the U.S. To give yourself a buffer, deposit at least $30,000. If you enter and exit stock positions on the same day with less than $25,000, your account will be flagged and you run the risk of losing your trading privileges. 

Forex day trading doesn’t have a legal minimum, but start with at least $500. Less than that and you’re limited on the number of trades you can take. If you want to produce a monthly income that’s worth withdrawing, start with $5,000 or more.

To day trade futures, start with at least $2,500, but $7,500 to $10,000 is better. Some contracts cost more to trade than others, but if you plan to trade the common E-mini S&P 500, that range of capital will suffice.

Making an income is possible, but not easy, with these recommended deposit amounts.

4. Consider Goals and Constraints

Before you invest time in creating or learning and then practicing a day trading strategy, consider your goals and constraints.

  • Do you have enough capital to day trade? If not, wait until you do. In the meantime, you can continue practicing your strategy.
  • Becoming consistently profitable takes six months to a year when practicing several hours each day. It will take longer if you do it only intermittently. Are you willing to put in that amount of time?
  • Once you are trading live, can you commit to trading two to three hours a day, accounting for your job and other commitments?
  • You shouldn’t give up your job until your trading profits replace your income. Therefore, given your other commitments, what time of day can you trade? Is your strategy designed for that time of day? Your strategy needs to fit your life.
  • Are you day trading because you want to quit your job? You will likely have to trade for a year or more to get to the point where you can replace your income by day trading.

Consider all these questions before investing a lot of time or money in learning to day trade.

5. Choose a Broker

While you are practicing and developing strategies, choose a broker. This may be the same broker you open a demo account with, or it may be another. Choosing your broker is the biggest “trade” you will make because you are trusting them with all of your capital. Look for a broker who balances great execution with customer service, reputation, and competitive fees.

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