Forex Trading Vs Binary Options Trading

Forex Trading Vs Binary Options Trading

Whereas the Foreign Exchange Market or Forex Market has been around for many years, Binary options are relatively new and have become increasingly popular over the last few years due to the high potential profits and the simplicity of the trading method.

When trading Forex a trader is speculating that the value of one currency will decrease or increase compared to another with the aim of making a profit. For example: The current price of GBP/USD is 1.31430 and you think the price will decrease in the future. You sell 1 lot of GBP/USD and wait for the price to decrease to the level where you want to close the trade and book the profit you have targeted.

When trading Binary Options a trader only has to predict if the price of a currency pair will decrease or increase from its current price over a defined period of time. For example: The current price of GBP/USD is 1.31430 and the trader thinks that the price will be lower in the next hour. So you the trader places a “PUT” option on GBP/USD and waits to see its price 1 hour from now. If your prediction is right you can make a profit of 90% on your trade stakes, if you are wrong you lose your trade stakes.

Forex: On the Forex market brokers will allow traders to trade on margin, each broker will set their own margin levels and can sometimes be as high 500 times your trade stakes. Trading using margin will allow a trader to make larger trades and to potentially make larger profits but also the risk is you could make larger losses. The risk with margin trading is that it is possible to lose more than your trade stakes.

Binary Options: When trading binary options there is no margin trading available, but there still good returns to be had. It is possible to make up to 90% on your trade stakes. With no margin available you can only lose your initial trade stakes and a trader can never lose more than their trade stakes.

Forex: When Forex trading a trader will never know what his profit or loss will be on a single trade until the trade is closed. To manage the risk a trader will be able to set limits and stop orders to either take a set profit or a set loss. With Forex trading it is possible to lose all of the money in your trading account and sometimes more.

Binary Options: In binary options trading a trader will know exactly what the payout will be on a correct trade before they place the trade and the loss can only ever be the trade stakes. Some brokers offer payouts up to 80% and sometimes higher depending on the type of option traded. This means that if you stake $250 on an option and the payout is 80%, you will make $200 profit if the option is a winning one.

Forex: In Forex trading a trader will select when to close a trade out and this can be done at anytime. A trader can also set stop limits and take profit limits which will automatically execute if the required level is reached.

Binary Options: When trading binary options a trader will first have to select an expiry length, this is the set period of time the option will be open and it will automatically close out after that time. Expiry times vary from as short as 60 seconds up to 1 month, and some brokers offer longer. Some brokers will allow a trader to close their trade out earlier than the expiry time but there would be a reduction in payout percentage.

Forex: In Forex trading there are a variety of order types. The most common ones are the market Buy/Sell) orders. There are more advanced orders such as: Limit, Stop, One Cancels the Other, Trailing Stop, Hedge orders and there are more complex ones as well.

Binary Options: In binary option trading there are five main trade. They include: High/Low (also known as: Call/Put or Up/Down), 60 Seconds Options, Touch/No Touch Options, Boundary Options, and Option Builder.

Forex: Most brokers offer micro lots which is 1,000 of the base currency. The maximum lot is set by the individual broker and can be as high as 100 standard lots which is $10 million in currency.

Binary Options: Every binary options broker has a minimum and maximum trade size. The minimum size may be $5 per trade while the maximum can be $1,000, $5,000 or even more.

Forex: In Forex trading you will need to consider rollover, swap and spreads as these are the charges you will incur. There are usually no commission fees.

Binary Options: There are no commissions or spreads in binary options trading.