How to Profit From Volatility in the Forex Market?
by shahid hussain
on Wednesday, March 18, 2009,
Most retail forex traders only know how to place directional trades, and miss the chance to profit on volatility.
Everyday there are economic data from US, UK or Europe, namely Non-farm payroll, New Homes Sales, Unemployment, Personal Income, CPI, PPI etc; some of these datas can move the forex market rather wildly. So to trade volatility is the best strategy for days like that.
Two ways you can profit from volatility:
1. Long strangle
Long strangle involves going long (buying) both a call option and a put option of the same underlying security. The owner of a long strangle makes a profit if the underlying price moves a long way from the current price, either above or below.
2. Buy Out in binary option trading
Buy Out in binary option trading is similar to long strangle. In the binary trading platform, traders can choose to bet that a particular currency pair is going to close of the range by the expiration time of the contract. Sounds complicated?
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