Binary Options Vs Forex

Before you start trading it is important that you are aware of the differences between binary options vs Forex, so that you are able to choose the trading method that suits your individual style and preference.

Forex trading is speculating the value of one currency with the other. The currencies are always traded in pairs. In binary options the trader predicts whether the price of the underlying asset increases or decreases over a period of time.

Margin

Margin can be used to trade in Forex. Brokers decide the margin that can be used in trading. It can be 1:200, 1:400 or 1:500. This allows traders to increase the investment that they can make in the market so that they are able to make a larger trade and profit even with a small account.

In binary options margin is not used for trading. It is still an attractive option for traders as they may be able to make big profits. You never get a margin call in this trade.

Payout and losses

The maximum profit that you can make from a Forex trade can never be known. All that you may be able to do is to set a stop order so that you are guaranteed a percentage of profit when you stop the trade at a particular time.

You may also be able to manage loss in the same way. In binary options the trader is aware of the loss and payout percentage before they place a trade. The payout may vary depending on the broker.

Closing positions

You may be able to choose when to close a position in Forex. It can be closed whenever the market is open and the broker has to execute it immediately.

In binary options the trader has to choose when the option may expire (one hour or one week) before placing a trade. The trade closes automatically at the expiry time. You may be able to get predetermined expiry times on different types of options from brokers.

Order types

Many order types are offered in Forex trading. Buy, sell, limit, stop, trailing stop and hedge orders are the popular types. Binary options offers five order types and they include high and low, boundary options, touch and no touch, 60 second options and option builder.

Trade size

Brokers allow traders to trade in micro lots. These can be 1,000 units of the base currency. The maximum amount that can be traded is also determined by the broker. In binary options also the minimum and maximum trade size is determined by the broker. The trading amount can be as less as $5 and as high as $5,000.

When you become aware of the differences between binary options vs Forex, you may be able to choose the trading platform you want to trade and make profits easily.