Online trading has been around for a few years now and has taken the market in storm. While many have already tried one or two different trading methods the majority of traders are still looking to understand the differences between binary options and Forex. In the following article we will try to help you better understand what these differences are and what are the pros and cons of each field.
Forex has been around for many years, starting in ancient times and up to modern times. In modern times Forex is mainly referred to trading Forex via Forex brokers, this type of trading has been around for more than 7 years and created at its time a revolution in what was known in traditional trading. Forex trading is mainly used to trade currencies taking two different currencies and speculating which will be the one whose price will rise or fall against the other. Once the trade is in your favor you and close the trade and take the profit.
Binary options are a later version of Forex trading which had begun only in 2008. This type of trading allows traders to invest in almost any existing financial asset; Stocks, Indices, Currency Pairs and Commodities are all available. Investments are made by speculating an assets price movement i.e. Call or Put, option are purchased on certain time frames and have a predefined expiry time and profit ratio. Once the option expire traders know whether they lost the trade or have made the profit.
Leveraging Vs non leveraging
Forex brokers as part of their marketing strategy offer traders to leverage their investment by 1:200 and up to 1:500 by doing so brokers are allowing traders to enjoy higher margins and higher investments than their actual investment, in case of a successful trade profit are paid in accordance.
Binary options brokers do not offer any leveraging of specific trade and instead use bonuses as a promoting method. Traders who deposit money to their account would usually receive an additional some as bonus money, the standard bonus amount stands on 100% on any initial deposit.
Risk Vs profit ratio
When trading Forex you can never know what will be the max profit of your trade, however in order to control your risk ratio investment plan you can set certain stop loss points so that your trade doesn’t exceed a certain point.
In binary options life is simpler; options are written in advance and contain all variables. Trading variables are written in the way of the type of option, the expected profit in percentage and even the expiry time of your option. In binary options there are no surprises.
Types of trades
Forex allows the trader to choose from classic buy/sell, Hedging, Limit, Stop Loss and other types of trading options. Trading assets are usually limited to currency trading although lately they have added certain stocks and indices to their trading portfolios.
Binary options offers the ability to trade classic Call/Put options, Turbo options offering high speed expiry times from as short as 30 seconds, Touch and No touch options also known as high yield options and offer payouts of as high as 500%, Boundary options and the latest option builder which allows the trader to build his own option according to his own risk profit ratio trading character.
Forex brokers use advanced online trading software which requires traders to download the trading platform to their computer
In the binary world there is no need for any downloading. Binary options brokers have developed advanced trading platforms which are completely web based and can be accessed from any portable device which has an internet connection.
Online trading is becoming more and more popular and defining which is the better way to go is completely up to the trader and his trading nature. While Forex trading allows greater flexibility, trading binary options is much simpler and there are no surprises in it.