Category Archives: Contributors

What is Binary Options Trading?

binary option trading

When it comes to forex trading, there is a plethora of options available to you. Of these options, binary options trading has become quite popular among investors in recent years, because of the low level of investment needed and the potential to score higher profits is there. As such, this realm of forex trading is particularly useful for novices who are just getting started in this investment practice and want a little more experience and knowledge building before dumping larger amounts of your money into forex accounts.

Unlike traditional models of investing, such as purchasing stocks or bonds, binary options are contracts in which your income relies on the direction of the given asset within a certain time frame. This is known as a less-risky option in forex trading, as you, the investor, get the same set income regardless of how much the value rises in the contract. The only thing that matters in binary options forex trading is that you were correct in your predictions.

To simplify matters even more, there are just two options in binary forex trading that you need to be concerned about: put options and call options. A put option is an investment made when you believe the price of the contract will be below the original price upon expiration. Meanwhile, a call option is the exact opposite, with you expecting the overall price to rise above the original value upon the expiration date.

This can easily be applied to forex trading. For example, if economic indicators are looking bad for the European Union, you could purchase a put option on a Euros contract, with the expectation of the currency’s value to drop by the time your contract is up. Likewise, if the value of the US dollar looks like it could be rising in the near future, the best way to capitalize on this while minimizing personal risk would be to purchase a call option on the USD and profit when the value does in fact, go up. Your leverage would not be as high as, say, a traditional forex trader relying on the currency’s consistent value and no set asset ceiling to be gained (or lost). However, binary options are essentially one of the safest bets you can make as a forex trader.

In a highly volatile market such as forex trading, it’s quite beneficial for newer or small-time investors to have the binary options available in order to minimize the risk on their investments. This allows them to learn the ropes of forex market practices and learn to read forex trading signals without suffering heavy losses along the way. It has all of the same currency pair mechanisms of traditional forex trading, but with smaller caps and less risk factor.

This article was written by Will from Forex Trading Finder. Visit Forex Trading Finder for more information on Binary Options Trading.

How to Make a Killing in the Yen

Japan Is About to Cry “Uncle!”

Make a Killing as Japan
Intervenes in the Yen Once Again

By Sean Hyman, Editor, Currency Cross Trader

Everyone wants to stay competitive.

Target wants to keep their prices somewhat in line with Wal-Mart. Burger King wants to keep their pricing somewhat in line with McDonalds. Otherwise, they lose customers to their competitors.

The same thing happens in the currency world.

All throughout Asia, many countries do tons of business with the U.S. and Europe. These Asian exporters have to keep their pricing somewhat in-line with each other.

Otherwise, their big export customers in Europe and the U.S. will do their shopping elsewhere.

How does a whole country keep their pricing competitive? Easy. They keep their currencies valued about the same.

An Overly Strong Currency
Can Destroy an Economy

If a country doesn’t manage their currency, their major export goods will start looking “expensive” to the rest of the world. If that happens, their best export customers will look elsewhere for cheaper goods.

This wreaks havoc on export countries.

Businesses slow down. Companies lay off workers. Unemployment levels eventually rise. It also slows down that nation’s overall growth.

So there’s a lot riding on these countries to “get it right” and keep their exchanges rates somewhat in-line with one another. Otherwise, they lose business to another exporting country who managed their exchange rates more effectively.

Japan is one of the Asian exporters that occasionally loses its competitive edge in the global market.

It’s all because of the Japanese yen.

The Japanese yen is seen as a “safe haven” currency. So when stock markets drop, or disaster strikes in some part of the world, traders pile into the yen and force it to climb against the dollar. Suddenly Japan loses its competitive advantage.

To make matters worse, Japan is a big export country. Japan has big-name exporters like Toyota, Sony, and Panasonic. Each of these exporters stands to lose billions in business as the yen strengthens in value.

So it’s no surprise that these companies scream at the Bank of Japan to do something when the yen gains in value.

They demand the Bank of Japan (BOJ) “intervene” in the currency market to force the dollar to rise against the yen. They want to push the USD/JPY exchange rate up enough to get the U.S. to buy Japanese goods again.

What Intervention Looks Like

To intervene in the markets, the BOJ must sell the Japanese yen aggressively in the market to try to manipulate the yen’s price.

The Bank of Japan did this back in 2004 for instance. They were very successful in the short-term. Check out the chart below, and you’ll see what a “currency intervention” looks like.

Japan Intervened Twice in 2004!

Click here to view larger image

As USD/JPY goes lower on the chart, it means the dollar is dropping like a rock, while the yen gets even stronger.

So when the central bank intervenes, the Bank of Japan dumps Japanese yen and buys up dollars as quickly as possible. That tends to shoot the USD/JPY higher on the chart, at least in the short-term.

For example, in February 2004, the Bank of Japan intervened in the markets and pushed the dollar up 6.71% against the yen in just 12 days. That’s an unleveraged return.

However, even with a modest 100-to-1 leverage, you could have made over six times your money in the Forex market.

Even without doing the math, you can see Forex traders made a killing in 2004, simply by buying the USD/JPY. (In effect, just following the BOJ’s lead.)

For the Forex traders out there… that was a move of over 700 pips. So if you were trading five mini-lots, you would have made $3,500. Trading 10 mini-lots, you would have made $7,000.

In April of 2004, the central bank dug their heels in and really taught the USD/JPY short sellers another lesson.

They intervened in the market and forced the USD/JPY pair to climb over 1,100 pips or 11.05% in under two months. So if you had bought the pair, you would have potentially made $1,100 per mini lot traded in the Forex market.

Now the Bank of Japan doesn’t intervene in the market very often. In fact, they didn’t intervene again until September 2010. Then they did again in March of this year.

The Bank of Japan is at it Again!

Please click here to view larger image

As you can see from the chart above, the Bank of Japan has intervened twice in the past year. The Bank of Japan intervened by themselves in Sept. 2010 as they typically do.

But in March, earthquakes, tsunami and a nuclear incident made the yen stronger than ever, as traders rushed for the safe haven. That caused many G-7 central banks to join in on the party…and all intervene in the yen at the same time.

That forced a much larger leap in the USD/JPY as you can see above.

The Strong Yen is Back in
the “Intervention Zone” Yet Again

Well, that “stubborn yen” has continued to strengthen yet again. Right now, we’re right in the middle of the intervention zone (the green area), where the Bank of Japan typically intervenes in the currency.

That means it’s very possible the Bank of Japan will intervene again to push up the yen’s value. Now there’s no way to know if they will intervene tomorrow, or next month, or later this year.

But as a trader, I know those Japanese exporters must be crying uncle now. That means I’m watching and listening for any whisper of another intervention.

I know it’s coming. It’s just a matter of when.

They could intervene tomorrow, considering the USD/JPY exchange rate has hit the 78-79s (as of this writing). Or they may wait until the USD/JPY hits the 76 level like last time. Or they could even wait for a new all-time low before they act.

But honestly, I don’t care when they intervene. It’s more of a question of reacting when they do.

Once you hear about an intervention happening, there are some serious profits to be made, simply by buying the USD/JPY pair in the Forex market.

And as a long-term investor, you can short the yen in the short-term with a simple ETF.  Again, it’s as easy as shorting the yen at the proper time.

Bottom line: an intervention is coming soon. When it comes, you can make a killing simply by following the Bank of Japan’s lead and shorting the yen.

Have a Nice Day!


Sean Hyman
Editor, Currency Cross Trader