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Taking your first steps into the FX Derivatives business may seem daunting and you may find yourself asking, “What are FX Derivatives?” Simply put, a FX Derivatives is a contract where the trader decides if a particular asset will go up or down in value after a predetermined period of time – making a profit when they make the right decision.

Trading FX Derivatives can differ rather significantly as compared to many other types of market trading. As the name suggests, Derivative implies having to decide between two options. At a basic level, traders make the choice between ‘Up’ or ‘Down’, also commonly known as a Call or Put respectively.

Call and Put are the simplest options in FX Derivatives, making it the suitable for traders who are new to the world of FX Derivatives trading. The following is a more detailed look at these two options:

1. Call or Up Options

If you are selecting a Call FX Derivatives, you do so predicting that the currency pair will end up at a higher price than the strike price at the end of the trading period. If you have made the right call, you will stand to gain a profit.

For example, in this scenario:

  • A trader wishes to trade EUR/USD and the current market exchange rate is at 1.10100.
  • That trader predicts that the price will go above 1.10100 in the next 5 minutes.
  • They select the option ‘Up’ (also known as the ‘Buy’ or ‘Call’ option) and how much they want to invest—for example, $100.
  • The broker has set a ‘payout rate’ for each time frame—in this example, a 5-minute period where the broker has set a payout at 86%.
  • If the trader predicts correctly, even if the price moved by only a fraction, the trader earns back their initial investment ($100) and an additional payout of $86 profit.

2. Put or Down Options

If you select the Put or Down FX Derivatives, you predict that the chosen asset value will be lower than its strike price at the end of the chosen time frame. This option is the opposite of Call/Up.

In the same example above,

  • The trader believes that the price will fall in the allocated time-frame.
  • Hence, the trader chooses to sell the EUR/USD.
  • The value of the currency pair must have to be lower than what it started with him to gain a profitfor this single trade.
  • If the trader predicts incorrectly the market direction, he loses his investment.

Why is This Good for Traders?

Simply Concentrate on Market Direction

The beauty of the Call and Put FX Derivatives is its simplicity. All a trader has to do is concentrate on the market direction. No margin calculations, managing floating trades, spreads, stop losses or take profit levels like in forex – simply up or down.

Straightforward Payout Rates

This fixed-return option allows a trader to calculate their profit potential and risk easily, giving them the comfort of knowing the exact amount of money they can earn before they fully invest in it. Knowing this information makes it easier for them to perform proper money management techniques and control their trading portfolio. The same goes for the broker – more transparency gives the broker the freedom to safely manage funds without any headache.

Portfolio Diversity

Whether as an additional product or stand-alone one, FX Derivatives let brokers offer more products with an easy-to-market, accessible financial instrument. They can offer an extensive range of commodities, stocks and indices, so no matter what you prefer or where your knowledge in the market is, you can have your pick of financial assets to trade.

Maximal Profits, Minimal Investments

Low cost and fast returns with high profits make FX Derivatives an increasingly popular form of trading in the financial market. It has the possibility of yielding highreturns. Expiry times for FX Derivatives are much shorter as compared some traditional trading methods, shortening the time you wait before you can see any returns. This allows traders to make quick trades and maximize profits while minimally investing their time and capital.


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Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford the high risk of losing your money. Please read and ensure that you fully understand our Risk Disclosure Notice.

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