A put option works the exact opposite way a call option does, with the put option gaining value as the price of the underlying decreases. While short-selling also allows a trader to profit from falling prices, the risk with a short position is unlimited, as there is theoretically no limit on how high a price can rise. With a put option, if the underlying rises past the option's strike price, the option will simply expire worthlessly.
An option is a contract that is sold by an individual, who is known as the option writer. The option writer receives a premium for selling the security to another investor who is called the buyer, or the option holder. The option buyer has the right, but not the obligation, to buy or sell an underlying security, which could be a stock, bond, index, interest rate, currency or commodity, at a specified price within a certain time period.
This Forex Trading for Beginner’s Guide will give you all the information you need so you can start trading Forex. You’ll learn what forex trading is, how to trade forex, how to make your first trade, plus our best forex trading strategies. By the end of this guide, you’ll be equipped with the right knowledge to tackle the world’s largest capital market. As a bonus, we’re also going to reveal the best forex trading platforms.
Two levels create the Forex market. The first one is called the interbank market. In this case, banks are the ones that trade. The second one is called the over-the-counter market, or just shorter OTC and it is the place for the regular traders and their FX activities. The most important thing before you even start trading online is creating an account with the Forex broker. This is the person who can give you the platform that you can use for further trading. When we talk about currencies, it is the US dollar that is majorly traded. It is estimated that more than 80 percent of the trades are covered with the US dollar.
We also need to mention Euro and Japanese Yen as currencies that are also used in trades but not as much as the US dollar. This market is well known for being one of the most vibrant in the world where a lot of things are happening and changing each second. Most importantly, highly skilled traders can earn a lot, but on the other hand, there are investors whose profit soared in a short amount of time and then plunged even quicker. It requires dedication, concentration, and experience to embrace all necessary skills for trading in this market, but if you try a little bit harder, the expected profit can be guaranteed.
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Unlike stock markets, which can trace their roots back centuries, the forex market as we understand it today is a truly new market. Of course, in its most basic sense—that of people converting one currency to another for financial advantage—forex has been around since nations began minting currencies. But the modern forex markets are a modern invention. After the accord at Bretton Woods in 1971, more major currencies were allowed to float freely against one another. The values of individual currencies vary, which has given rise to the need for foreign exchange services and trading.