Binary Options or Forex?

June 18, 2015 by in category Articles tagged as , , with 0 and 0
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Binary options or forex trading are both financial investment options but they are different and similar in one way or another. Binary option is an option where you profit or lose depending on the outcome of the market. In this case, a trader either makes a fixed profit or loss. In binary options you predict the decrease or increase in an asset’s price over a given period. On the other hand, forex trading otherwise known as spot trading is where positions are opened and closed in a trading session. For a trader’s profit or loss, all this depends on factors such as the entry price, the number of shares, exit price, lots bought or sold or contracts.

Binary Options or Forex: Similarities?

  • Both are done online and accessed anywhere at anytime
  • It is possible to trade in both markets at small investments
  • In binary options and spot trading, you make or lose money depending on the way the asset or currency moved
  • You can trade both of them in short-term time frames

Binary options or Forex: Risk aspect

In Binary Options trading, you know the exact amount you are losing, as well as, the amount to gain in advance. As the trader, you will be controlling the premium that is at risk when getting into a trade and this is the only amount you will lose in case the trade goes against your prediction. In some broker platforms, you are allowed to cut your maximum loss by “folding” when certain conditions are met prior to the time of expiry.

On the other hand, in spot trading, there is no certainty that you will only make a loss on the pre-calculated amount you risk. There are issues that affect the final maximum risk such as liquidity to make a stop order, as well as, spillage among others.

If we looked at the risk from another perspective; in binary options you get to risk more than you profit. For instance, you can get into a trade with $100 and potentially profit 60%-80% of the money if the trade goes you way but this is less than the $100 you would lose if the trade did not work out. In forex trading, you can get into a trade with $100 and set your take profit position to be at $300 or any other amount you wish. Without a stop loss in forex trading, you can burn out all your investment in a single trade.

Binary options or Forex: Transaction fee

When trading binary options, you will not incur any costs while transacting apart from the costs factored in on the final cash out. When it comes to spot trading, the transacting cost is usually in form of a spread or commission.

Binary options or Forex: Choices in trading

With binary options, you are not limited to currency pairs alone as it might be in some of the forex trading broker platforms. With most binary options brokers, you have the opportunity to trade on other assets like stocks, commodities, indices and cryptocurrencies in some cases.

Binary options or Forex: Time frames

This is another difference when you seek to decide on binary options or forex. In forex, you can have a trade last for one second to many months; you open and close the trade as you wish. When it comes to binary options, you have to wait for the trade to close on the time frame provided or selected when you put or call on the asset.

Any Questions?

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Binary Options trading involves high risks which may not be suitable for every person. Never invest money which you can’t afford to lose and make sure you familiarise yourself with the basics of binary options before you start. MrBinary.co.uk is not responsible for any losses, as all our pages should be used for informational purposes only.

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