What is the difference between binary option trading and forex trading?
What is the difference between binary option trading and forex trading?
The Binary option trading and the forex trading has ways which they are similar and they have their differences too.
The Binary options trading deals with the prediction of whether the prices of an asset will increase of reduce in value and therefore investment is made on the asset. While forex trading involves the speculations on currency pairs and some other commodities too like precious metals whereby the fluctuations in the exchange rates of the currency pairs and the fluctuations in the prices of the commodities forms the basis of the forex market.
The binary options trading is not as flexible as the forex market because trading is either placed in an upward direction or in a downward direction where if the right direction is predicted properly, the trade will enter into profits while forex trading has the use of stop loss, take profit, buy stop, sell stop etc.
The binary options is in one direction whereby at expiration of the option, you either loose the predetermined amount or you gain a in known amount, whereas in forex you may not know your profits until the trade just closed.
Ever since my involvement in the financial world and the financial market precisely, I have been able to stick to only one financial market which is the foreign exchange market. The truth is I got attracted to the financial market from an advert about binary option, but the truth is I did not gather enough experience of the trade before I switched to trading forex. With the little experience I have about binary option, I was only able to realize that I had to choose each time between up or down ( making prediction as to if the market would be a buy or sell) with no definite form of market analysis. Forex trading on the other hand is the most liquid financial market with a twenty four hours weekdays service. The market is traded through different method of analysis ranging from the fundamental to technical type of market analysis. It is no place for gamble, and only the patient and well trained traders can achieve success in the market.
Binary option trading is a form of Forex trading but here its a guessing option ,either yes or the no and the profit or the loss is decided by the fixed time means here traders have to tell that whether the price will go up or down from a particular level after the specific time but in Forex trading ,there is no time limit .Here in the Binary option i feel its like the gambling as no traders can tell clearly if the particular pair will show the upward direction or it will go down but yes here we can earn or loss some good amount and for that i consider that the level of risk in such option trading is more when compared to the ordinary Forex trading .
Fx and binary trading have a lot in common, but to be a successful trader there is need to be able to differentiate the two. The binary market was coined out form the computer binary system that makes use of only two input 0 or 1. When we talk about binary trading, the traders engaged in anticipating the movements of an asset (either up or down), over a specified period of time. So specifically, there is no third way; just itís either up or down. Binary trading is just like the roulette; once you make the wrong prediction, youíre done. And if youíre right, you take your proceedings as well as return. In order to be a successful binary trader, you need to come out on top with most of the bets. Talking about the forex market, you are exposed to unpredictable level of risk or profits. In forex trading, the only thing the traders are concerned about is the direction of the currency pairs as well as the trends. Thatís what makes it risky and unpredictable. Forex trading is very extreme and there are no limits to the amount of money that canít either be won or loss, except with the application of risk management tools.
Difference between binary options trading and forex trading? The difference is In binary options, both the level of profit, loss, and the time of the close position, are determined before opening a position , what is traded in binary options? Here, you only estimate the direction of the price movement of a pair within a certain period. Take for example "Open the" call "option if you expect EUR / USD to rise within 1 hour". This information often appears on binary options trading platforms. From there it is clear that the focus lies in the direction of the movement of EUR / USD, whether it will go up or down. Where and when prices will move is a major aspect. There are no additional calculations such as trading lots, order types, let alone stop loss levels like in Forex.
In Forex, trading size is determined by the lot value. These lots vary, ranging from standard lots, mini, micro, to nano. One standard lot is worth $ 100,000, while 1 mini lot is equal to $ 10,000. The smaller the lot unit, the smaller the size of your trade. It is impossible to know with certainty how much loss or profit will be obtained, because the level of interest or loss fluctuates according to price movements. The risk calculation here is not final, but only risk per pip. If the entry is a standard lot, then your trading risk is not absolutely worth $ 100,000, but depends on how big the price movement
1. Complicated interfaces which mostly available in web-based platforms and may confuse beginners easily.
2. The time frame here is used as options when we want to close our trade by the system.
3. Profit and loss payment is fixed based on some percentage, starts from 80% to 95% from the initial money used as the leverage.
4. People can easily hurt their psychology in business and become emotional.
5. Easily turn people to be a gambler and lose money even faster within minutes.
1. Simple interfaces and fewer buttons to trade. Available in web-based and application for most devices. Easier to learn for beginners.
2. Time frames are used to help giving different views of the market price. Trades can be closed manually or automatically by stop loss and take profit.
3. Profit and loss is based on the amount of pips and lot size we use to trade. The more we risk, the more money we can earn or lose.
4. People can become emotional and bored when waiting for the market to move to their expectation but the impact is smaller.
5. Can make people into gambler when they use news to trade but takes days to lose their whole money as the news is not always releasing every day.
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Binary option is a part of financial market just like forex. They both trade on currencies. But they are different is many ways. Binary options does not require too much analysis like forex. Binary option has been tag as gambling by many traders. Is not like forex where the market forces of demand and supply is what drive the market. In binary is more like a simulation rather than real. In forex, tradable instrument are very numerous. There is metals shares, indices, minerals etcetera. But in binary option what is mostly traded is currency pairs. There is no metals and minerals. Binary brokers are very feet unlike forex where we have thousands of brokers littered every where.
Forex trading involves trading the direction of price movement of a currency against another in a given currency pair. The trader needs to be able to correctly predict the direction, as well as and the extent of price movement of the currency pair in the forex market, in order to trade profitably. Technical analysis methods and fundamental analysis method may be employed to determine profitable forex trading opportunity. A trader can lose an amount of money which is higher than the investment during forex trading.
Binary option bets on either the price of the currency pair gong up or down within a certain amount of time, or within a definite time frame. To be profitable in binary options trading, the trader has to correctly predict both the currency pair price direction within a specific time frame. This introduces a bit more complications in binary option trading which is often overlooked by many. The risk and reward in a binary option trading is fixed unlike in forex trading.
POSSIBILITIES ARE INFINITE IN THE FOREX MARKET, YOU CAN ACCOMPLISH ANYTHING !
- Forex trading depends on the economic news, technical analysis and fundamental analysis beside the trader's experience and knowledge so it is considered a real business, while Binary option trading depends on the luck and time and some technical analysis, so it is considered a form of gambling.
- Forex trading typically includes high leverage may exceed 1:1000 in several brokers and this enables the trader from achieving big profits using small amount of money, while in Binary option trading you need to bigger amount of money because its leverage is not big like Forex .
- Forex trading has no limit of profits for each trade and you can enter and exit from the market easily any time, while in binary option trading there is a limit for profits per each trade and you can't exit from your opened trade until the expiry date.