Binary Options Vs Forex: What’s More Effective Forex or Binary Options
Binary options vs Forex trading is an article where you will find the necessary information on two different trading types. The differences are major. But both trading types are profitable.
To be an expert trader, you have to know both the advantages and drawbacks of Binary options trading and Forex. One trading type will allow you to earn within a short time. And another one will take a longer time to make the same profits. Additionally, they may not serve the same needs.
At first, we will give you an idea about two different trading types. So, it’s easy to know which one is best suited for you. Then one by one, we will describe the trading process of each type.
So, let’s start with the definition of forex trading and Binary options.
What Is Binary Options: Introduction
Future asset price prediction is the fundamental of binary options trading. In binary options trading, traders get profit from the increasing value of the particular trading assets. The payout percentage is also fixed.
In binary options, whether you have to predict the right asset’s value or will lose 100% of your initial investment. Moreover, you can trade options on different trading instruments. We will discuss the trading process later in this article.
Before jumping to the phase of how it works, we are recommended to read what is binary options article, which is a great source to know about binary options trading. This article will work as a guide for new traders.
Binary options trading is popular among low-skilled traders. Because it is a simple financial instrument, that helps traders to earn within a very short time. Those who are completely new to trade binary options can open a demo account from the recommended broker list.
Types Of Binary Options
You will find different types of binary options trading available for traders depending on the expiry time. Each type is different from the other. Moreover, you will find different profit ration including some unique features.
There are many advantages of knowing the details of all binary options types. Additionally, it will make your trading life simpler.
We will give a list below of those types. These are:
- Touch/No Touch
Advantages Of Binary Options
In our previous point, we have mentioned that Binary Options hold numerous advantages. These advantages mainly encourage people to get involved with binary options trading.
Additionally, having a good knowledge of the trading market will help you to make the right decision.
We are going to bullet some advantages below:
- The trading process is simple for binary traders
- Possible to start with a low investment
- High return percentage
- You can trade without depending on the market condition
- Fixed risk and reward
- Can trade binary options on a wide range of trading instruments
What Is Forex Trading
Forex trading is popular among traders for its decentralized marketplace. It is the most liquid marketplace, where currencies are traded.
In forex trading, traders exchange one currency in terms of another currency. There are some commonly traded forex pairs along with minor pairs.
Moreover, you will get an opportunity to trade forex using leverage. Leverage helps traders to trade the currency market using more money.
Traders around the world can trade the forex market at any given time. The forex market is open all day long including business hours.
Types Of Forex Trading
As we all know, the forex market is the largest financial market in the world. Traders from around the globe join the currency trading market to earn money.
However, you will find any specific types in forex trading. But based on the experience level and trading strategies, you will find various types of traders.
The list of forex traders:
- Day trader
- Swing trader
- Position trader
Advantages Of Forex Trading
Anyone can get involved with forex trading to earn money. But you need some knowledge to avoid trading risk. Only because of the improper trading strategies, more than 90% of traders walk away with empty-handed.
So, it will add an extra benefit to your trading life if you learn the basics of forex trading.
Here are a few advantages of the forex market:
- The forex market is flexible for traders. So, you can trade anytime you want
- Transparent for traders
- The forex market allows you to use Leverage trading
- High liquidity
- No involvement of Central Exchange
- Most volatile trading market
- Weekend trading
Binary Options Vs. Forex Trading
Along with their trading terms, you will get many more differences between these two trading types. We will describe all differences one by one in this article.
The Form Of Trading:
Traders compare binary trading with gambling because of the time frame and future prediction. Suppose you are going to open a position of $30. If everything goes right, then you will win the trade with an extra $24 with an actual investment.
Here, the return percentage is 80%. On the other side, if the value of the asset goes down, the trader will lose 100% of the money that they invested in. To make the trade profitable you have to win the maximum trade. There is no opportunity to minimize your loss amount.
However, you can not consider binary trading as a full form of gambling. Because at this moment, most of the broker platform is regulated by different Financial Institutions. Traders now can trade with different types of options offered by different trading platforms.
In forex trading, you don’t have to predict the future asset price to win the trade. Here, traders mainly analyze the market by using different trading tools and strategies. Moreover, the trading time is longer than Binary options.
In forex, you have to predict a target area instead of asset price prediction. So, you can close your deal anytime you want.
Potential Gain From Trading:
Forex markets are known to have a higher variability with greater risk for traders. Sometimes in the currency market, traders must decide both the direction in which the asset will go and predict how high or low that particular asset will go.
So, traders don’t know for sure the final status of the risk and profit. In forex trading, unless using some tools to control trading, there are no definite limits on how much money a trader can make or lose.
One such tool is stop-loss, which restricts traders from losing money more than the limits. In other words, if a trader has lost a certain amount of cash, he/she won’t be allowed to trade. Moreover, the trade will automatically shut down. Similarly, the potential profit might also be determined beforehand. Forex traders have the option to close the trading once a certain amount of profit has been realized.
On the other hand, both the profits and losses can be managed by implementing the limit/stop orders. In forex trading, users can set the stop-loss, and take-profit. As a result, traders are still able to make a profit in spite of if they’re unsuccessful in winning the majority of their trades.
In Binary Options, traders always know the exact risk before placing any trade order. The minimum return percentage is approximately 60% if your prediction goes right. Remember, the risk amount will always higher than your potential gain. There is no opportunity to minimize your loss amount.
Binary trading operates on specific timelines. In binary trading, the trader has no control over when a trade will begin or end, once trading has commenced. Each option comes with a start time and an end time.
The expiry time starts from 60 sec to 1 month. However, it will depend on the asset types. Before the commencement of a binary options trade, users must select when the order expires. At the expiry time, all trading activities will automatically close.
Some brokers give traders the option to close early, but it is recommended that you exit the trading when you have received a percentage of the expected return. But, not all brokers offer this facility.
Similarly, few brokers will allow traders to delay the expiry time until the next expiry time. Known as “rollover,” this option is only available if traders can increase their investment by a pre-determined percentage.
Things are a little different in forex trading. In forex trading, users can perform trades that last to one second to a few weeks or months. They can open and close the trade whenever they like. The actual point is that traders have full control over trading time.
However, keep in mind that this flexibility has its version of advantages and disadvantages.
In Binary Options, traders will get a wide range of trading instruments from various types. You can trade binary on stocks, commodities, currencies, etc. Additionally, traders can select trading instruments depending on the trading time.
Forex trading will give you a very limited number of trading assets. More than 70 currency pairs are available in the trading market. But traders widely use a few major pairs. You can only trade those pairs which are available in your broker’s platform.
Leverage And Margin:
In forex trading, margins are available for traders. Here, brokers fix the maximum margin. Margins facilitate traders to increase the amount of their investment capital. As a result, there is an opportunity to make a sizable profit, if the trade is a successful one.
Leverage does similar things. It will increase your profit potential. However, the ratio will vary from broker to broker.
Binary Options does not offer any margin and leverage to traders.
There are many major and minor comparisons available along with the above list. But, the investment decisions will depend on your expertise.
Binary Options is a simpler process than Forex trading. However, both the forex and binary options market will give you profits.
Lastly, you have to find out the best opportunity depending on your trading goals.