Forex vs Binary Options

Video Instructions on Binary Options

FREE VIDEO Tutorial on Binary Options Trading from Daniel Green on Vimeo.

Forex

When trading forex, it is speculated that the value of a certain currency will either decrease or increase in comparison to the other for profit making purposes. For instance, suppose the current price of EUR/USD is 1.3 and you speculate that the price will go up in the future. You can therefore decide to purchase one lot of EUR/USD while waiting for the price to go up till when you want to put a closure to the trade in order to realize the desired profit.

binaryoptionstradingBinary Options

When Binary options are being traded, you only need to predict if an asset’s price such as stock or currency pair will either decrease or increase from its present price over a given period of time. For instance if the prevailing price of the EUR/USD currency pair is 1.3 and you feel that the price will go high in an hour’s time, you can place a �Call’ option and wait to see the EUR/USD price in one hour’s time. In case your forecast is correct, you can easily make an 80 % profit on your investment.

Difference between Forex and Binary Options

  1. Margin

When trading forex, one can use margin. Each broker determines the level of maximum margin which can occasionally be 1.2 or 1.5 times. Margin allows one to increase the investment capital in order to make a bigger trade and larger profit in case the trade is one that is a winner.

When trading Binary options, margin is not used. However, one may still make a huge return on investment such as 80 % or even 400 %. Therefore, for traders, Binary options are quite attractive.

  1. Losses and Payouts 

It is not possible to know in advance the maximum profit that one can obtain on a certain trade when it comes to Forex. You can only set a stop order or limit in order for you to be guaranteed a particular profit percentage in case the stop or limit is executed. The Forex losses are able to be managed with stop orders and limits in a similar way of managing profits. With Forex, the maximum loss can be all the money available in the trading account.

For Binary options, it is possible to know the loss or payout return percentage that you will receive for a certain option upon its expiry. In fact, some brokers offer payouts of close to 80 % or 400 % subject to the traded option. Therefore, suppose one invests $ 500 on an option with an 80% payout, one ends up making $ 400 in profit in case the option wins. Some brokers do not offer a “loss back” and if you have a losing trade option, all the invested amount in the trade will be lost.

  1. Closing a position

When dealing with Forex, one has to choose when the position is to be closed. The position can be closed anytime when the market is open while the broker must accept and have the order executed. Before making your trade, one has to make a selection as to when the option will expire; whether in a week’s time or in an hour’s time. The trade will automatically close while the broker then offers different types of options that have predetermined times of expiry. Some brokers may allow you to have your trade closed early.

  1. Order Types

There are several order types when it comes to Forex. The most important ones are the Buy/Sell orders, Hedge orders, Trailing, Stop and Limit. On the other hand, one can trade five types of Binary options that include the High/Low, Boundary options, 60 Seconds Options, Option Builder and the Touch Options.

  1. Costs of Trading 

One has to consider what the roll overs and spreads are when trading Forex and in case there are commissions. On the other hand, when Binary options are traded, there are no rollovers, spreads or commissions.

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