Binary Options and Forex Trading: What You Need to Know
You’re looking to make extra income, and need to know the differences between binary options and Forex trading. Congrats. You came to the right place.
If you’re looking to get into investing, it’s good to know what you’re talking about. After all, this is your money on the line.
Two investment opportunities we see new investors curious about are binary options and Forex trading. Both options have their pros and cons, while still offering investors a unique financial opportunity.
However, binary options and Forex trading are not targeted at the same demographic. We’re breaking down all the differences you need to know.
Binary Options and Forex Trading
Binary options are essentially just trades made on capped markets with capped potential. They’re low risk and low reward, which makes them very attractive to new investors.
They also provide relatively good odds to double or triple your money.
Forex options are very similar.
They work by trading on currency, which is also a commodity. However, Forex options offer a much more complex trade.
How They Trade
Binary options trade on many different commodities, while Forex are exclusive to currency. In fact, Forex stands for foreign exchange market.
The difference here is that binary trades are much easier to speculate on. The sheer amount of markets allows newcomers to pick something less volatile and complex than currency.
The geopolitical aspect of currency makes Forex trade speculation difficult.
Limits vs. Limitless
Binary trades happen by buying or selling an option. Each option is either priced or open to investment, depending on the type of binary option. Binary options also have time limits.
For instance, let’s assume the speculation is on whether the price of gold will rise above $1,000 by 4:00 p.m. today.
Binary traders buy the option and hope that the price of gold rises above $1,000 by 4:00 p.m. If gold rises they receive a return, and if not they lose their money.
Forex trading works similarly, but with much more speculation.
For example, an investor buys EUR because the price of EUR vs. USD is rising in favor of the EUR. They buy EUR currency and wait out the prices raise, then convert it back into USD for profit.
Unlike with binary options, there is no time limit or set value.
Forex traders speculate not only on whether currency prices will rise, but also on how much they’ll rise. The potential to double your money and then lose 2/3rds is possible with Forex trading, but the rewards are limitless.
One large difference between binary options and Forex trading is margins. Forex trades offer margins while binary trade do not.
Put simply, brokers offer margins to allow increased investment capital. They accomplish this by pooling investor assets.
For example, a 1:1000 margin would give $1 the purchasing power of $1000 dollars. This makes increasing capital on winning investments very easy.
Most Forex trades are difficult to manage for beginners, but margins help tip the scales towards smaller investors.
Wrapping It Up
All in all, the differences between binary options and Forex trading create an intimidating skill gap.
Binary options are for the less experienced trader, while Forex offers more return with more challenge. We suggest using binary options as a stepping stone into the world of Forex trading.
If you’re looking for additional information about binary options, look no further. Our website is packed with everything from broker information to new binary strategies.