What are FX options and how to trade foreign exchange options at IQ Option?
FX options are contracts that gives you the right to exchange one currency for another at a preset exchange rate at a specified moment of time in the future.
What are FX options at IQ Option
What are FX options at IQ Option
There are two main types of FX options. A call option gives you the right to buy an asset. Of put option gives you the right to sell an asset.
Put and call options at IQ Option
Put and call options at IQ Option
How to trade FX options at IQ option?
Specify the amount of your investment on the right-hand side of the menu.
Choosing amount of investment
Choosing amount of investment
Select the expiration time the time when the option contract ceases to exist by pressing the time button.
Selecting expiration time
Selecting expiration time
Selecting strike price for FX options
Now select a strike price. A strike price is a set price of an asset at which it can be bought or sold in case the option is exercised. Strike prices are indicated in white and accompanied the chart.
Selecting strike price
Selecting strike price
Next to the strike prices, you can see the profitability scale. To check the potential profit for the chosen strike price mouse over the higher button for buy positions call options or over the lower button for sell positions put options. The green scale will be indicating your profit while the red one will be showing your loss.
Reading profitability scale for call and put options
Reading profitability scale for call and put options
You choose strikes manually thus influencing the size of the price band. Choose the price direction in the Online trading platform. Click on higher if you think that the price will go up. Click on lower if you believe the price will go down.
Selecting strike price manually
How to fix profit/loss before expiration time?
You may sell an option ahead of time and fix your profit or loss before the expiration time. In order to do this press these sell button.
IQ Option is an online options and forex broker. The company also offers other financial instruments such as commodities, CFDs and cryptocurrencies. The company offers their products to traders from different regions including Latin America, Europe and Asia. They’ve also won several awards and continue to evolve and introduce new features that make trading easy.
IQ Option overview But can you really make money trading on IQ Option? Like with any other broker joining IQ Option doesn’t guarantee that you will make money.
Trading in financial instruments carries some risk and majority of traders eventually lose their money. However, the few that actually make money do so because of their knowledge of the markets, use of proven trading strategy and having psychological stability to follow their trading strategy through.
IQ Option scam or legit broker?
One of the easiest way to determine a website’s standing on the web is through third party sites. I used similar web to view IQ Option’s standing compared to other online finance and investment institutions. Standing at 18th position, this gives it a good reputation among online options and forex brokers.
IQ Option standing among finance and investment companies Another thing I looked at is the distribution of the countries traders come from. From the results, IQ Option has visitors from over 250 different countries.
It’s safe to say that majority of these are actual traders. The good thing is that no one country has over 20% visitors meaning IQ Option is trusted by traders from all across the globe.
IQ Option has visitors from over 250 countries
IQ Option is fully regulated by CySEC
IQ Option was established in 2013 was eventually licensed by CySEC. Their main function is to oversee financial institutions that handle customer deposits.
CySEC guarantee of IQ Option
Like other financial authorities, CySEC will keep a watchful eye on IQ Option’s activities. This includes ensuring that trader funds are kept separate from IQ Option operating funds.
It also ensures that in case IQ Option goes bankrupt, traders are refunded up to $20000. But if you have any disputes with IQ Option, it’s advisable to first contact their support team to see if can be resolved.
From 2014 to date how has IQ Option developed?
IQ Option started out as an options broker. Over the past 4 years, they have continued adding different financial instruments that include forex, CFDs, stocks, indices and cryptocurrencies.
The platform is also available in desktop apps and mobile apps. Other improvements include addition of popular indicators and tools that make trading easier. The platform also offers VIP accounts which increase a trader’s earning potential.
The platform’s focus on trader needs has made it popular worldwide and earning it several awards.
IQ Option is continuously evolving
IQ Option complaints
Each online broker will attract trader complaints over time. IQ Option is no exception. One common complaint I came across was delayed withdrawals.
This is a common problem across many online platforms. However, the good thing is that no trader has ever complained that the platform withheld their funds.
Overall, IQ Option is a legitimate and progressive online options broker that serves traders across the globe. It’s a good place to make money trading different types of financial instruments. If you’re considering becoming an IQ Option trader, I suggest trying the Binary Trading Option demo account first. Just to get a feel of how the platform works.
When trading the financial markets, the risk of losing your money is always there. Once your enter a trade, there’s a 50/50 chance of it going either way. On the IQ Option platform, you can exit a trade before it expires. However, this will mean forfeiting a fraction of your money. Besides trading only when the market conditions are right, capital management is necessary if you’re to ensure that your account balance remains intact. This guide will teach you some of the capital management strategies successful traders use on IQ Option.. Capital management strategies used by successful traders
Investing the same amount on each trade
Losing trades can put a dent in your account balance. You want to recover your money. So you decide to increase the amount to invest in the next trade. Hoping it will be a winner and therefore recover your lost money.
Unfortunately, if this trade loses, your account balance will be worse off.
One of the common capital management strategies successful traders use is investing the same amount per trade. Take a look at the example below.
If 6 out of your 10 trades are profitable, you should be able to offset losses and make a $8 profit.
With this strategy, you will only use profits earned to trade. This means that if your first trade is a winner, you should use the total earnings for subsequent trades.
Let’s look at an example. Assume you start trading options with a return of 80% with $10. If the first trade is a winner, your profit will be $8. However, you will use the $18 earned on the next trade and so on. Look at the chart below.
In the table above, you’ll notice that the second trade lost. However, the potential earning for this trade was $32.40. That’s the amount to trade in the next session. In total, the loss was $10. However, since the third trade was a winner, the total profit was $15.92 (deduct the $10 loss and $32.40 invested in the trade).
This strategy uses the power of compounding to ensure that winning trades offset losses incurred in previous trades. It’s best suited for experienced traders who only trade two to three times each day.
This however is a high risk strategy. It implies investing an amount you would have made (but didn’t) in a trade. If you’re a beginner trader, it’s advisable to avoid using this capital management strategy especially if you don’t have a huge account balance.
In addition, if you choose to use this strategy, it’s advisable to stop trading if you make two or three losing trades. Making additional trades might increase the risk on your account.
Martingale strategy
I created a guide that analyzes the suitability of the Martingale strategy in money management. Here it is: Is the Martingale Strategy Suitable for Money Management in Options Trading?
This is probably one of the riskiest money management strategies out there. It suggests increasing the amount you invest per trade until you finally get a winning trade. Once, you have a winning trade, you should start the cycle again with a small amount.
The disadvantages associated with this strategy are more than the advantages. For example, unless you have lost of capital, you might end up losing all your money if you suffer several consecutive losing trades. Another disadvantage is that the profit earned in winning trades cannot be justified by the amount invested. Remember that winning trades must offset losses incurred in previous trades.
Below is an example of the Martingale strategy at work.
Trading with your gut
This is a high risk – huge returns capital management strategy. It simply involves investing amounts based on how “likely” you think a trade will go. For example, if you identify a trend, chances of your trade winning are quite high. So, you can decide to invest a large amount on a single trade. If however you’re not sure whether the trade will be a winner or not, you can choose to trade a smaller amount.
The problem with this strategy is that emotions will eventually get in the way. If you invest a large amount on a losing trade, fear might grip you discouraging you from trading large amounts in the future. If on the other hand small trades make you money, you might become overconfident trading huge sums in subsequent trades.
The point is, trading with your gut doesn’t truly count as a money management strategy.
Why must you have a capital management strategy?
As a trader, you must anticipate days when you’ll incur losses. But what effect will the losses have on your trading account? If you use a high-risk capital management strategy such as the Martingale system, chances are that a loss can wipe out your entire account.
Your main objective as a trader is to protect your money. This means that you should do everything you can to make sure that you don’t lose a huge chunk of your capital on a few trades. It’s therefore important that your capital management strategy have ways of protecting your account from excess risk.
For example, besides having a certain amount set for trading each time, you must also decide how many consecutive losing trades you’re willing to incur before stopping for the day. In addition, your strategy should state when to trade and when not to trade.
There are many different capital management strategies you can use when trading on IQ Option. You can choose one among those described above or, create one which meets your trading goals and preferences. Trading forex or any other financial instrument carries some risk. However, if done right, it can result in you making good profits.
Trading involves probability and you’re not guaranteed profits always. However, by employing a good money management strategy, you can always be sure that your account will continue to grow.
Traders who largely rely on technical analysis cannot overlook the importance of support and resistance levels. These two lines answer a simple question: At what points does the price seem to fluctuate within at a specific time interval?
By knowing these levels, it then becomes easy to know your possible trade entry points as well as where the trend is likely to reverse.
Another huge advantage of using support and resistance levels is that they can be used alongside many technical indicators. This increases probability of entering winning trades.
Finally, they are not complicated as you’ll see in this guide.
Overview of Support and Resistance
Support lines are drawn to mark the lowest price ranges a chart reaches during a specific period. For example, during a 1 hour period, you’ll notice a certain low price range where prices reach in the chart before bouncing back upwards. To have a valid support, your horizontal line must touch at least 2 lows.
Resistance lines on the other hand are drawn to mark the highest price ranges a chart reaches during a specific period. For example, during a 1 hour period, the price might reach a certain price range several times before it bounces back down.
You should note that the price points do not have to be exactly the same. But they must be within the same price range. In addition, support and resistance lines do not necessarily have to be horizontal. In the case of an uptrend, the resistance line can be charted to connect the higher lows of the trend.
Setting up support and resistance on IQ Option
The easiest way to set up support and resistance on IQ Option is by using the horizontal line provided in the graphical tools feature as seen in the image above.
To draw a support line, select a horizontal line. Next place one end on the low of a particular session. Then extend it to touch one or more lows of that session.
To draw a resistance line, use the same technique. However, the line should connect the highs of that session.
If your line touches more than 2 price points, the support or resistance is considered a strong one. If prices manage to break out of a strong support/resistance, the resulting trend is usually quite strong.
What to remember when using support and resistance
Support and resistance on IQ Option
When a support line touches many lows, it’s considered a strong support. On the other hand, if a resistance line touches many highs, it’s considered a strong resistance. Prices will take a while before they break out of these levels. Thus, price action Bitcoin Trading Platform within these levels is more reliable.
When support and resistance levels are weak, prices tend to break out of them quite easily. Price action trading therefore becomes quite difficult since you’ll have no idea where the markets will turn.
As prices break out of a support or resistance line, new support and resistance levels are created. For example, if prices break out of a support level, it now becomes the resistance level and vise versa.
Trading using Support and Resistance on IQ Option
Using the chart above, there are clearly strong support and resistance levels. This means that chances of prices breaking out of these levels is quite low. The points where price touches either support or resistance are your trade entries.
If price touches the support, you should enter a long buy position (about 5 minutes). If the price touches the resistance, you should also enter a long sell position.
Learning how to spot and draw support and resistance levels is one of the crucial skills you must learn as a trader. As you’ve seen, trading using these technical tools is quite easy. However, the profit potential they present is massive.
Now that you know how to use support and resistance in your trading, practice using them in your IQ Option demo account. We’d love to hear your results in the comments section below.
