Kinds of Trading Strategies

Methods that are proven effective coupled with a trading strategy are a financial traders’ secret to success in his field of trading. The same goes in foreign exchange trading. While in currency trading, various options of strategies are utilized to come up with risk profiles related to the movement of securities underlying it.  These strategies can be learned through a forex course.

The Butterfly Spread is one of the trading strategies that traders apply. In order to gain profit, the trader must realize what the currency price and the exercise price are and how close the currency price is to the average exercise price.

The Iron Condor is a trading strategy utilizes by traders. In this strategy, the trader uses short options and utilizes different strikes. The difference between this trading strategy compared to the butterfly spread is that it results to the higher possibility of profit coupled with net credit that are low.  It is usually learned in a futures course.

Another trading strategy is the straddle strategy. In this strategy, the traders sell both call and put in exercising an option price. This is beneficial for the trader because this strategy allows a greater profit for him if the selling price ends up lose to the exercise price. But the risks in this trading strategy might result in a big loss if the movement of the price is different from what the trader expected.

Another trading strategy is called the strangle. This also utilizes the call and put’s advantages. As a result, this strategy decreases the net debit if the trade and the possibility of earning a higher profit.

The covered call strategy is a strategy done when a trader buts options and sells calls. Like the straddle, the strategy called “strangle” is also made via a call and put but with different strike price. This in effect decreases the trade’s net debit as well as the possibility of profit.

The last and most popular strategy in options trading is the “covered call”. This happens when a trader buys an option or sells a call. This strategy lowers the trader’s risk since his options are covered by other positions. Although the profit is limited, the loss is also controlled.  To learn all of these strategies take a futures class.