Is There Opportunity for Options in FOREX?
Options and exotics offer new possibilities for traders and open many doors to new and exciting trade opportunities. My advice: There is enough action in the major pairs and the top-tier minors and crosses in the spot market to satisfy most traders.
Exotics have real appeal to the experienced trader, in my opinion. While liquidity is poor and fills on trades can be miserable, the trends tend to be long. If you can get aboard, you might catch a nice long ride. When online retail FOREX first began in the 1990s, the markets were inefficient; classical chart patterns that have not really worked well in futures or stocks for decades played out like textbook examples for two or three years. Alas, more traders arrived, and with them, the liquidity and the efficiency and the easy pickings disappeared. There is a sense that because of the low interest -- for now -- in exotics, the markets are still relatively inefficient. This market inefficiency can make them subject to better profit potential than the majors, ceteris paribus. I see clean classical chart patterns, for example, frequently on the longer-term EUR/PLN (Euro Polish Zloty) charts. But be cognizant of the minimum margin requirement of 10 percent for U.S. FOREX traders. If you have the experience, time, and the inclination, spot FOREX exotics may well offer meaningful opportunities. Because of liquidity, spreads, and -- in the United States -- poor leverage -- they are usually better long-term trade candidates. Specializing in an exotic can offer a basic course in fundamental analysis, at the very least. Adopt a Baht today.
By Michael Duane Archer