Binary options Vs Forex

Binary Options vs Forex Trading is a good comparison whether to invest in binary options over forex or both.

Now it’s the time we clear all your confusion.

In this lesson, we shall mainly concentrate on the comparisons between binary options & forex. ( binary options vs forex trading)

Without wasting time. Let’s first take a small recap on what binary option trading is as well as forex trading.

What is Binary Option Trading?

In trading binary options, you only predict whether an asset will increase or decrease in value during a fixed time-period. 

For example,

If you think that price will rise above the strike price, then you buy. Or else, sell if you think that price will fall below the strike price.

If your prediction is right, you get a full percentage reward attached to the risk. However, when wrong, you lose the amount you risked.

With binary option trading, you know precisely how much you stand to win or lose with every trade.

In other words, you know exactly how much profit you will make on your investment should your prediction on the trade be correct.

Unlike Forex, in binary options, you can invest in many more assets which includes; commodities, stocks and currency.

What is Forex Trading?

Forex Trading is simply buying and selling of countries currencies.

You can trade Forex online over the counter market through a broker or do physical exchange through Forex bureaus. When you trade, you either buy or sell.

You buy a currency when its price value is appreciating and sell it when its price value is fluctuating.

Currencies are traded in  pairs against each other therefore, you buy one currency as you sell the other. The reverse is also true.

Like binary option trading, you earn from trading Forex if your prediction on a trade is right. The profit is on the currencies’ interest rate differentials.

Binary options differ significantly from Forex in one way or the other.

Let’s now look at the advantages and disadvantages of trading both binary options and Forex.

Binary Options Vs Forex

Maximum risk

 Option contracts have fixed risks and fixed rewards while in Forex there are no limits to how much you can make or lose.

The binary trader predicts whether the underlying asset, commodity, currency or stock will go up or down during the fixed period of time.

If the prediction is wrong you lose all the money risked but if you get it right, you receive the risked money back and the return.

However, in Forex, you can lose all the money on your trading account if you are not using money management tools like a stop losses.

Trade management flexibility and maximizing reward

To be successful in binary options you must win majority of your trade. In Forex the winning rate doesn’t matter as long as you have a great risk reward ratio.

Also, you can set  your profit targets when trading Forex, stop loss, trailing stops and scaling.

The flexibility in the trade is quite a lot unlike binary options.

In other wards, a binary trader has no control over a trade that has been executed until it ends.

Forex traders can carry on trades from seconds to months and can open and close a trade whenever you feel like.

Transaction costs

No transaction costs involved in binary options.

Expenses are tied to payout percentage while in Forex trading transaction costs are attached to spreads and commissions.

Trade choices.

In Forex trading you trade only currencies while in binary options you are provide with a variety. You can trade variety such as Forex, commodities, indices, stocks.

Unless you only want to trade currencies you can as well try other assets. So with binary option you have a variety of options at your disposal.

However, this may make it hard to make the right choice that will earn you profit with ease.

Leverage.

Forex trading provides an option for margins where a trader can execute big size trades by borrowing money from the broker to increase his or her investment.

In binary options there is no such option.