Should you Choose Binary Options or Spot Forex?
The Forex is the Foreign Exchange; this is the market where currencies can be traded against each other. Every currency is paired against another; such as the USD against GBP. The rate fluctuates throughout the day; if you purchase $100 of USD and the rate moves in your favor you can turn the $100 into a higher figure. Of course, the rate can also go against you. The movement of these rates is often heavily influenced by economic activity.
In contrast, Binary options have not been a possibility for as long a time as the Forex. It offers an option based on potential price movements; you purchase the option but do not need to buy a share or any currency. In fact, many traders who have experience in the Forex have switched to binary options and are successfully trading.
The risk involved in binary options is lower; this is mainly because you purchase an option &and not actual shares or currency. Significantly fewer funds are needed to purchase binary options. In addition to this, when trading in binary options you can only ever lose what you have invested; you will always know what level of risk you are exposed to and how much you may lose if the trade does not go in your favor. You will also know what your maximum reward will be if the trade goes the right way. In fact, some brokers will now let you sell your trade back to them; this will help you to reduce your losses and have sufficient funds to try again.
No matter how experienced you are trading in the Forex there are a multiple of reasons which can cause you to lose significant amounts of money. The risk associated with this type of trading is much higher.
When you choose to trade the Forex you are free to trade in any currency as and when you want. This means that if you see a profitable scenario developing you can immediately purchase currency and sell again as soon as your trade has run its course. Unfortunately, if you are trading in binary options then you may struggle to find the trade you want; you are restricted to the trades that the broker makes available.
Although some brokers will allow you finish a trade early to protect your investment and reduce your exposure, they will still take their commission and leave you out of pocket. This is not an option when trading on the Forex as you can buy and sell whenever you like, even after just a few seconds! Although you cannot usually adjust a trade at the weekend as the brokers and most of the markets are closed for the weekend.
There are a variety of strategies which can be applied whether trading in binary options or on the Forex. Your personal experience and attitude will define which the best option for you is and where to trade. Both markets offer benefits and risks; the decision to invest must be carefully considered before you start using any funds.
Trading in binary options means you will not be hit with any additional costs. These are incorporated into your investment; you will either lose your investment or gain the stated return. The Forex, however, has more flexibility and, therefore, more costs associated with it. Commission is charged on every transaction and this will vary according to the selling price or purchase price of the currency. You will also be more exposed if trading with spreads.
As you would expect, the Forex allows you to trade currencies; and nothing else! Binary options will allow you to trade with a wide range of assets. Currency options exist ad are commonly used but there are other; more complicated approaches; you can choose to trade in stocks, commodities or even indices. This increased range of options will mean there is always something worth trading in.
Part of the thrill and the risk of investing ion binary options is that the price of any asset can fluctuate at very short notice. If you have read the market correctly you will be in a position to make the most of any change in price. As your return is already set you will know what you will receive providing the trade goers in the right direction. Trading on the Forex is subject to much bigger risks and variances; making it exceptionally possible to lose significant amount of funds; even when you thought you would only be slightly exposed.
Binary options are generally a safer choice when it comes to considering which option to invest in. This is because a binary trade will either be successful or not; you either get a return or lose your investment. Once the trade is placed it will finish itself. However, trading on the Forex, it is easy to allow a trade to overrun and lose any profit made; this kind of mistake is common and often has an extremely negative effect on your finances.