While Forex trading has been prevailing from the late s, binary options are relatively new to the market and recently gained popularity among retail investors after its approval by the U. Securities and Exchange commission in This article talks about the pros and cons of both investments and helps you evaluate which is suitable for you.
Forex trading is done using currency pairs in which you exchange one currency for another and try to achieve profit by using the difference in rate of exchange between those currencies. Hence forex trading requires users to speculate whether value of one currency will decrease or increase compared to some other currency in order to make profit.
Once the Euro price increases as per your expectation, you will again sell it back to purchase more dollars. Binary options are also called digital options or all-or-nothing options because of their nature of payouts.
In binary options, users have to speculate the price movement of the underlying asset. Unlike Forex market where the asset is always currency pair, binary options allows users to trade with any underlying asset such as commodities like gold or silver, stocks and equities, currency pairs, market indices etc. The users can choose any of the underlying asset and choose the strike price and expiry time for the trade. Both binary and forex options are available for day trading and hourly trading as well.
In order to trade with Forex, you need to open a trading account with any reliable Forex broker. Forex trading requires good understanding of market trends and some technical expertise as well. The forex market involves complex trading operations such as setting stop-loss to limit your losses, leveraging, choosing the spread size, managing risk levels and analyzing market trends etc.
Some of these might be complicated for novice traders and if any mistakes are done in live trading account, they can lose money easily. Forex market is open on hour basis for 5 days a week.
Binary options have become more popular among retail investors because of their simplicity and ease of use when compared to Forex trading.
Binary options do not require extreme market expertise or understanding of technical analysis tools. You can open a trading account with any licensed binary options platform with a minimum deposit of just dollars. You can place the trades using binary options with just easy steps.
You need to choose the underlying asset, strike price, expiry time of the trade and then place the order. Majority of the forex trading platforms offer support for margin trading or leveraging. Traders can leverage up to 1: This is especially helpful if you want to trade a larger volume and do not have sufficient balance in your trading account.
For example, if you are trading with a margin of Most forex trading platforms do not have support for social trading. Binary options do not have support for such leveraging options. Binary options have support for social trading which allows new traders to copy the transactions of successful and experienced traders in the social network. In forex trading, you can never estimate how much profit you can make from a particular trade.
You can either set stop-loss or limit order in order to ensure certain fixed profit for that trade. When you use leveraging, you have risks of margin closeout if you lose a trade with huge margin. You can even lose all the money in your forex trading account if you make one wrong decision. Also in Forex trading, you will lose lot of money as commissions to the brokers. The payout is always fixed and hence you can be sure of how much profit you can make from a particular trade.
Also if you lose that particular trade, then you will lose all the money you invested on that trade. So the loss is also predetermined in binary options which make it more reliable. Both these trading methods have their pros and cons and traders need to choose carefully based on their experience level and market understanding.
Forex options have been prevailing for long time and binary options are relatively new with lot of scam brokers existing in the market. So you should be careful before opening a trading account with any binary options broker.
Binary options are especially suitable for novice traders because of their ease of access, social trading support and higher payouts. Your email address will not be published. July 19, Guest 0 Comment. Method of trading Forex trading is done using currency pairs in which you exchange one currency for another and try to achieve profit by using the difference in rate of exchange between those currencies. Ease of Access In order to trade with Forex, you need to open a trading account with any reliable Forex broker.
Support for Leveraging and Social Trading Majority of the forex trading platforms offer support for margin trading or leveraging. Conclusion Both these trading methods have their pros and cons and traders need to choose carefully based on their experience level and market understanding.
Are binary options trading just a big scam? May 3, George 1. Leave a Reply Cancel reply Your email address will not be published.More...