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Binary Options Vs. Forex Trading

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Article By Thebinaryoptionsbroker.com

 

Binary Options Vs. Forex Trade

 

For any trading investment, investors must compare binary options vs Forex trading factors appropriately. In the past few years, binary options are becoming most common. The main reason being the options offers high profit returns and are easily traded. The binary option involves the betting over a currency pair that it will expire in-the-money. If positive, it returns a fixed amount, not withstanding how far the option goes. At times the option only pays off only if the option goes in-the-money, regardless of price at expiry. For example if a binary had a strike price of 1.3, the long position would return $100 per contract regarding the higher price than strike price at expiry. The options are standardized and traded on exchanges. On the other hand, in Forex trading, there are many shared features. They also provide the opportunity, but not the need to buy (call) or sell (put) a certain underlying asset at a particular price (strike price) by or on a particular date (expiry date).Forex trading does not involve currency pairing, but rather the future trading on the currency pair. It is the exchange-traded agreement to buy or sell at some point for a price that relies on initial factors.

 

When trading options, one has to predict if the price of an asset will go up or down from its current value over a given period of time. For instance, the current price of USD IS 1.31 and one thinks its might increase in the next hour. The individual can place the bet and wait for the one hour. Any correct predictions result to up to 80% profit on one's investment. While, Forex trading one speculates that the value of a particular currency will increase or decrease in comparison to another, with a target of making profit. For instance, when the current price of a currency is 1.4 and one thinks the price will shoot in the near future. One buys 1 lot of the currency pair and wait for the price to increase until the desired point before closing the trade at profit.

 

In options, margin is not used when trading. People can still make great percentage profits on their investments, so traders find binary options very attractive. The advantage is that an investor can never get a margin call. While in Forex trading, people use margin to trade. Each broker determines the maximum margin and sometime it can be up to 1:500. Margin allows investors to increase their investment capitals so that they can make an increased trade and make more profit for the winning trades.

 

In binary options, before making a trade, the investors will know the exact payout and loss return percentages to be made for the particular option at expiry. Brokers can offer payouts up to 80% or even more depending on the option traded. Other brokers never offer loss backs, this means that if an investor's option trade is a losing one, the investor will definitely loose the invested amount and not more. In Forex trading, the investors never know the maximum profit to be made on a particular trade. The investor can always regulate an order and be guaranteed some percentage profit if a stop regulation is initiated. Any losses and profits in Forex trading can be managed with the regulations to limit or stop orders. Actually, the maximum loss in this trading is an investor loosing all the money in the trading account.

 

In binary options, there are no spreads, swap or commissions when trading. While in Forex trading, an investor has to consider the spreads and swap, and any commissions.

Each broker in binary options determines the maximum and minimum trading size for their clients. Sometimes the maximum amount can be up to $5000 and the minimum up to $5 per trade. While in Forex trading, brokers allow their clients to trade smaller lots such as 1000 units of the base currency in the trade. They also determine the maximum trading amount.

 

Binary options are available in five types which an investor can choose to trade. They include; 60 seconds option, high/low, touch/No touch option, option builder and boundary option. In Forex trading, there are a variety of order types. The most essential ones are the market orders of buying/selling. Other advanced orders include stop, OCO, trailing stop, limit, hedge orders among others. Therefore, investors must be able to lay out the factors of binary options vs Forex trading in order to choose an effective investment.

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I really like your article......I edited a bit in order to avoid the advertising you were making and I am telling you this because, again, I really like the topic...

 

I said on a different thread that regardless how controversial binary options are, they offer a trader (a diversified trader) discipline in the sense that if your option is not expiring in the money, there you go, your stop loss is hit........and in a binary option trade there's no way out........whereas in foreigh exchange you can change your mind and hope/pray/wish for something to happen when chances are close to zero.....

 

again, please develop the thread without advertising and this would be a hell of a thread

 

TW

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Hi there,

 

How is the payout modeled?

 

You say these options are standardized and traded on exchanges - what exchanges and where is the spec please?

 

Any losses and profits in Forex trading can be managed with the regulations to limit or stop orders. Actually, the maximum loss in this trading is an investor loosing all the money in the trading account.

Please, get a grip and show some respect to your audience here. I don't think anyone here is going to trade FOREX with such extreme leverage that one trade would wipe them out. With binary options you could still bet your entire account on one trade and lose it all.

 

The R/R you mention does not interest me as it is less than 1:1 - and you said 1:0.8 was a maximum!

 

I've dabbled with barriers before and found the added element of time to my trade idea tricky. The better payouts were in the 2-4 week area. I found it a lot harder than trading the futures/spot markets.

 

Hopefully some of the more experienced chaps can chime in (zdo?).

 

With kind regards,

MK

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