2Bull Forex Blog

It is very common that stock is transacted in blocks divisible by 100, which is called a round lot. A round lot has become a standard trading unit on the public exchanges for quite sometime ago. In stock market, we have the right to buy and sell an unlimited number of shares as long as there are people are willing to sell and we are willing to buy at the price that the seller has fixed. Usually, for a brokerage firm, they set their commission for a transaction for minimum 100 units of share at a certain price. If we buy less than 100 units of share, they still impose us this commission. For an example, if we buy 100 units share and pay the brokerage firm USD 30 for the buy and sell transactions, they also charge us that amount: USD 30 also, if we only buy and sell 1 units of share.

The amount of commission that the brokerage firm charges for the stock transaction is varied from one and other. Some brokerage firm may charge less but they require you to trade a lot in one transaction. So, each unit of option is representing 100 units of share.

In fact, there are two types of options that are call and put option. Call option gives its owner the right to buy 100 units of share of a company at a specified price that has been agreed between the call option owner and the seller within certain period of time. So, within this period of time, if the stock price goes up, the call option price will also go up and vice versa. The second type of option is put option. This option gives its owner the right to sell 100 units of share of a company at a specified price that has been agreed between the put option owner and the seller within certain period of time. Put option seems like the opposite of call option. If the stock price goes up within this period of time, the put option price will go down. Either call or put option can be bought or sold. As long as there are people willing to sell, there will be people willing to buy.

There are four permutations that are possible exist during the transaction of an option. The first one is buying a call option meaning that buy the right for yourself to buy 100 units of share. Second is selling call option meaning that sell the right to buy 100 units share from you to someone else. The third one is buying a put option meaning that buy the right for yourself to sell 100 units of shares. The last one is selling a put option meaning that sell the right to sell 100 units of share to you to someone else.

The other way to make these differences clearer is always remember that the call option buyer hopes the stock price will go up and the put option buyer looking for the price per share to fall. For the opposite side, a call option seller is hoping the stock price will maintain or fall. Whereas, put option seller is hoping that the stock price will go up. If the option buyer no matter dealing with the calls or puts option is correctly predicting the price movement of the stock, then they will gain profit from their action. For option, there is another obstacle we have to face besides estimating the direction of the stock price movement. This obstacle is that the change of the stock price has to be taken place before the deadline of the option.

As a stockholder, we may be able to predict a stock’s long-term prospects by waiting for a long-term change of the stock. However, for option holder, we may not have that kind of opportunity. This is because options are finite; they will lose all their value within a short period of time, usually within a few months. However, it has long-term options that can last up to one to three years. Due to this limitation, time will be an important factor to determine whether an option buyer can earn a profit or not.

Foremost, option is granting the buyer an intangible right to buy or sell 100 units of share at an agreed price between the buyer and seller of the option. Therefore, option is just an agreement regarding to 100 units of share of a specific stock and to a specific price per share. Therefore, if the buyer buys an option at the wrong timing, then, the buyer will not able to make any profit. Wrong timing means that the stock price does not move or does not move substantially when the deadline has arrived.

When we buy a call option, it seems like we are agreeing that we are willing to pay the price that being asked to acquire a contractual right. The right provided that we may buy 100 units of share of stock at a specified fixed price per share, and this right exists at the time we purchased the option until the deadline of the option. Within the time we purchased the option until the deadline of the option, if the stock price goes up more than the fixed price indicated in the option agreement, this call option will become more valuable. Just think that we buy a call option that granting us the right to buy 100 units of shares at the price of USD 70 per share. Let said before the option deadline, the stock price has gone up to USD 90 per share.

As an owner of this call option, we have the right to buy 100 units of share at USD 70, which is USD 20 less than the current market price. This is the situation when stock market price is more than the fixed contractual price indicated in the call option contract. In this example, we as buyer would have the right to buy 100 units share, which is USD 20 less than current market price. Although we own the right to do so, we may unnecessarily to execute our right. For an example, how about if the stock price has gone down to USD 50. We would not have to buy shares at the fixed price of USD 70 and we could select not to take any action.

If you’re looking at trading in the foreign currency exchange market (commonly known as the forex) and you have the classic Pink Floyd tune “Money” playing in your head, complete with the “cha-ching” sound, you might want to read this article first. With all of the forex brokers out there, ready and willing to take your cash to help you make your first trade, it may be a little intimidating finding a broker that can help your profits grow and not walk away with your cash! To that end, as part of your forex training, here are a few tips that will help you in selecting a broker that you can trust and not end up with a proverbial “bucket shop.”

1. “There is no risk!” Watch out for a company that claims that there is little or no risk in trading the commodities market. Any broker that is legitimate should tell you that there is ALWAYS risk! True, you can mitigate that risk with stop losses, sound trading techniques, and equity management, but there is always a risk involved in trading. If it sounds too good to be true, it usually is too good to be true!

2. “It’s in the background.” Check out the company’s background. If a company refuses to give you background information on their company or information about their customer’s experiences, beware! You may also want to check with the National Futures Association for any history of fines or deceptive trade practices by the company in question. Another excellent source of information is the Chicago Board of Trade. It’s there that you can check to see if the company is a registered “futures commission merchant” (or FCM for short). Companies registered with these two organizations are more likely to be legitimate than those that are not. In addition, there is a lot of information that can be found with these two organizations that can help you further your forex training.

3. “Millions are offered for the taking!” If a company says that you will make fantastic amounts of money in a short time, run for cover! Like anything else in life, to be a good forex trader takes time, effort, and LOTS of study. There is no magic bullet that will have you makings thousands in just a week (unless you’re the scammer!).

4. “Be careful sending cash!” Use caution when sending cash over the internet. Make sure the entity you are sending money to has satisfied your background check and that they are registered to business in a country with strong legal remedies in case a problem arises. Be especially wary about sending money to countries that have reputations for high levels of corruption and bribery.

5. “Margins, Margins!” Use caution when trading on the margin. Depending on the broker, it may make you responsible for more money than you actually deposited! A key part of your forex training should teach you how margins work and your broker’s approach to them before you trade margins.

6. “Which bank?” Watch out if a company states that they are safe to work with because they trade in the “interbank market.” To date, the interbank market is largely unregulated and is usually traded by central banks, multinational corporations and other big time players. A potential scam by a fraudulent currency trading firm may boast of good prices because they deal with the “interbank market.” It is most often the case that only extremely large concerns deal with the interbank, and again, it is not regulated and is a loose conglomerate large business and governmental organizations and institutions.

Now that you have some of this forex training under your belt, there are a few other ways to evaluate a broker. They are: websites that compare brokerages, forex training courses, word of mouth, and finally, checking in with an experienced retail forex trader who has good trading strategies and deals with his or her broker on a regular basis. Doing all of these things can help you make a great choice in selecting a forex broker which, of course, will help you keep that great tune “Money” playing in your head.

Forex Trading - is this your ticket to financial freedom or abundant personal wealth? Can you become very rich trading in forex? Is forex trading made out to be more difficult than it is in real life?

But first, what is forex trading?

The investor’s goal in Forex trading is to profit from foreign currency movements. Forex trading is a form of investing in currencies on the international markets.

Day by day, forex trading is becoming an increasingly popular income source. The forex trading is one of the most excited and lucrative business you can be involved during your lifetime because you can do it from home or office and from any country in the world and you do not need a big capital to start off with. Forex trading is not bound to any one floor but done electronically between a network of banks continuously over a 24 hour period. With newer forex products, including mini forex products, the entry level for a newbie to forex trading has been made much lower than in the past.

Is forex trading easy?

Forex trading is made easy by not designating it as a pure game of chance or luck- there are time proven strategies that you can adopt to secure your income for life by trading in forex. Forex trading is, however, a serious job and requires a lot of commitment. Forex trading is all about disipline, once you choose your trading system stick with it. The ability to cut your losses when they are small and to allow your profits to soar when the going is good is very important to you as a forex trader. This is, in fact, the secret behind profitable forex trading. This may be the most important tip in becoming a successful forex trader, and to gain your personal wealth.

While forex trading may be an exciting proposition, it is not without reasonable risks. Forex trading is by nature a speculative occupation. As forex trading is never paused, which ensures true 24 hour trading, there is market volatility. Coupled with the ability to trade during virtually any important event, such trades can induce substantial market volatility leading to risks.

This has led to many treating forex trading as a market for day traders, because by getting in and out of trades within a very short period, you reduce the risks involved. You can also adopt time proven strategies including swing trading and position trading for forex, though forex trading has been largely made out to be a predominantly day trading market. In other words, by adopting established trading methods,whether day trading or swing trading the forex market, you can reduce your risk substantially while improving the chances of making money through established trading setups, trading strategies, trading systems and using the best trading platforms.

With the advent of cutting edge technology, delivering real time information and currency prices to your desktop via the internet, forex trading is now made available to the individual investor at very low cost, and sometimes for free.

Forex trading can be your ticket to a serious income. You can be a self employed full time forex trader in the comfort of your own home. What makes it more important to you is that you can accelerate your learning process to become a successful forex trader earning massive income by putting yourself under the mentorship of established forex traders, to pick their brains and adopt the winning strategies that have made millions for them.