The Ultimate Way to Trade on FOREX
The ultimate way to trade FOREX is to set the conditions for trading and then let transactions proceed automatically. Instead of being glued to your computer screen all day, your trading system should free you to have a real life and still make a profit on your trades. There are several different approaches to reach this goal; in each, your initial decisions will highly influence the success or failure of your trading program.
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Trade by Robot
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A FOREX robot is real-time trading software that continuously monitors market conditions and places trading orders when conditions match the profile you have programmed into the robot. Your trading profile will be based upon a set of technical indicators. These indicators trigger trades when critical values are reached. For instance, a momentum oscillator is an indicator which will trigger a trade when prices reach a calculated level. By carefully programming a FOREX robot, you can let the robot sweat the details while you concentrate on the big picture.
Managed Accounts
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A FOREX managed account is one in which you turn over the trading duties to an experienced professional. Your task is to carefully screen candidates for the job based on their previous experience, their use of trading techniques that you understand and approve, and references from satisfied customers. You set the parameters for the account manager's activity. For instance, you decide how much leverage (borrowing) to use -- the less collateral you pledge, the greater the portfolio leverage and the greater the risk/reward potential. A conservative portfolio may use two to five times leverage, whereas an aggressive portfolio may feature a 40:1 leverage ratio -- you pledge one dollar of collateral for every $40 you borrow to finance your portfolio. Your account manager constantly monitors the FOREX market, while your job is to monitor your account manager's performance.
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Auto-Trading
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Auto-trading is a novel concept pioneered by companies like Zulu Trade. In an auto-traded account, you choose from a menu of professional traders. Your account is then structured to mirror the activity of your chosen trader. The trader is not aware of your account -- the auto-trading broker handles the linkage between the trader's portfolio and your own. Whatever trades your trader makes for his own account will also be executed in yours, adjusted for the relative size difference between the two accounts. Once again, your task is to diligently research the candidate traders before you tie your portfolio to his or hers.
Binary Options
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FOREX binary options are like a bet: if your currency reaches a given price within a given time period (measured in hours or days), you win. Otherwise, you lose your investment. For instance, you can buy a four-hour binary option that pays off if one U.S. dollar becomes exchangeable for 125 Japanese yen at option expiration. The option will cost you approximately $20 to $40, and will pay off $100 if successful. You set the initial conditions by choosing parameters like the trading currency, the expiration period, the target price, and the option price you are willing to pay. Once you buy the option, you simply wait for option expiration to see if you will collect a payoff -- the time until expiration is yours to spend as you like.
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