Binary options have become very famous during the last two years and the main reason behind this is that, they offer high profit returns along with being easily tradable. The FOREX market works like any other simple commodity market and follows the simple rules that goes with demand and supply.
Now to understand the main differences between Forex & Binary options becomes crucial, based on which we can tell which can be the better trading method. Before that, we need to know what actually Forex and Binary options are.
While trading Forex, we are reflecting that the value of one currency will either increase or decrease as compared to the another; so that we can make a good profit. This can be better understood by an example; like the current price of EUR/USD is 1.12 and you think the price will go up in the future, so you buy a lot of EUR/USD and wait for the price to increase to such a point, where you want to stop your trading and enjoy the profit you want. To Know more about Forex Trading, click on the link
Defining Binary options
The Binary options trading is a bit different from the Forex trading because, in Binary options you only have to make a prediction, if the price of an asset will be increasing or decreasing from its existing price,for over a certain period of time. For example, currently the price of EUR/USD is 1.12 and you think the price will be higher in the next few hours. So, you place a “call” option or EUR/USD and wait to know its price few hours from now. Now if you get to know that your prediction is right, you can make a profit of up to 80% of your investment. To learn more about Binary Options, click on the link.
Forex Vs Binary Options
FOREX:– Forex grants you to use margin and to setup the maximum margin in Forex. It is generally 1:500 or 1:200. This margin permits you to augment your trading capital so that you can place larger trades which itself gives you larger profits but also can be the reason of larger losses if the trade goes bad or does not work properly.
BINARY OPTIONS:- In this case the margin is not used . Even without margin, binary options allows you to make between 60% and 100% on standard options and this makes it highly fascinating to traders. Moreover, you never have to worry about a margin call.
Losses and Payouts
FOREX:- In Forex trading, there is no bond to the maximum profit that can be earned by you. A stop or limit order that assures a particular profit percentage can be set by you, if the stop or limit is executed. Apart from this, losses in Forex Trading can also be managed with stop and limit orders in the similar manner, as profit is managed. The maximum money you lose in this case could be all of the trading funds in your account.
BINARY OPTIONS:- Here before you open a Binary Options Trade, you will be knowing what your loss will be in future, if by any case the trade does not go your way. Not just that, you will also know exactly what your payout will be if your trade finishes in the money. Because you know the potential profit or loss, you can easily manage your risk in a rather more convenient way.
Closing a Position:
FOREX:- In Forex trading you choose when to close the position. You can choose to close your position on any desired time, when the market is open and the broker has to accept and execute the order.
BINARY OPTIONS:- In this case, before you make your trade, you will have to select when you want the option to get expired (For say, 1 hour or a simple 1 week). At the “expiry time” your bill will close automatically on its own. The broker offers you various options with predetermined expiry times. The “early closure” option is not offered by all brokers and might not be made available during the entire time, the trade is active.
FOREX:- Many varieties of order types are there in Forex and the most important ones are the market (Buy/Sell) orders. More advanced orders are Limit, Stop, OCO (One Cancels the Other), hedge orders, trailing Stop and others.
BINARY OPTIONS:- In this, there are basically five types with which you can trade. They include: High/Low or Call/Put or Up/Down, sixty seconds options, Touch/No Touch Options, Boundary Options and Option Builder.
FOREX:- The maximum trading amount is determined by each broker and can be as high as 100 standard lots or $10,000,000, while only few brokers allow you to trade in micro lots.
BINARY OPTIONS:- The respective broker concludes the maximum and minimum trading size for its clients. At times, the trading amount can be as low as $5/trade and the highest can be like, $1,000 or $5,000 or even more.
Cost of trading
FOREX:- You will have to consider rollover in this case and also swap and spreads, as these are the charges you will bring in. Generally no commission fee is demanded.
BINARY OPTIONS:- There are no such things like rollover, swap or spread in Binary Options Trading.
Basically each option has their own set of advantages and disadvantages. At the absolute end it is the final call of the respective trader which one to prefer over the other. Also, if you like this Article, do share it with your friends on Social media