I once made a lot of money in one day trading the Japanese yen -- almost doubling the size of my trading account. But in retrospect I was damn lucky -- I could have lost almost the entire account had the trade gone against me, but I was so green, and probably cocky, at the time, that I didn't understand how much risk I was taking. It was a perfect scene to support the adage: In trading it's better to be lucky than good.

Of course the rest of the story is that I gave back to Mr. Market every cent and more that I made that glorious day. More proof that I was in over my head and didn't know it. It didn't have to be that way for me. And it doesn't have to be that way for you when it comes to currency trading.

I've talked with a lot of people over the years who were really excited about the potential for pulling down big profits trading currencies. They were enticed by the advertisements being spit out by some of the forex brokerage firms showing a guy on the beach in some tropical paradise, with laptop in tow, leisurely racking up profits in forex. The reference of course was that "you too" could make so much money trading forex you can quit your day job and lay on the beach (there is a kernel of truth to that) and best of all, it's easy, we make forex easy (not a even a kernel hidden there).

Unfortunately many of these people opened accounts and quickly lost everything -- and are now understandably turned-off to anything that has to do with currencies. It's a shame, because forex trading is great market to trade, it's highly efficient, 24-hours, and you can do well. But you need to know what you're doing. You can't run a hundred yard dash before you learn to walk.

A novice can make big bucks initially in forex, but keeping it and staying in the game require risk-control -- that's one of the parts of spot forex that isn't easy -- cutting loses. I proved that in my early ventures into the market. Many others have done the same over the years, and many more may follow. But you don't have to take the path of massive volatility till you learn this game. Currency futures options may be a better alternative, especially if you are new to this market.

I think it's the best single way for most people who are still learning to speculate in the currency market -- big profit potential, limited risk (assuming you enter only long positions by either buying a call or put), easy to do, and engaging is how I would define currency options in a nutshell.

Big profit potential because currency options give you the advantage of trading with huge amounts of leverage, just like you can get in a normal futures contract, yet when you buy a currency option, either a call (expect a currency to appreciate against the U.S. dollar) or put (expect a currency to depreciate against the buck). And yet your maximum risk is limited to the cost of your option, plus brokerage commission. And the typical holding period for a profitable currency option trade ranges from weeks to months.

So, to summarize the benefits of using currency futures options:

1 High leverage to produce high profit

2 Risk strictly limited by entering long only

3 Intermediate-term holding period (several weeks to months)

4 Just plain easy to do

One of the main reasons I like using options is because it allows you to buy time to let your fundamental forecasts play out. And I think fundamental trading over the intermediate- to long-term is where the big money is. But don't take my word for it, just take a look at what Jesse Livermore had to say:

The big money is made in the big swing. Most of my money was made by sitting, not by trading.

Currency futures options allow you an opportunity to play for the big swing.

Jack Crooks
Black Swan Capital