Estimated reading time: 7 minutes
Hi guys! It seems majority of us are confused with the differences between binary options and forex trading.
As this is our first article in our binary options series, we’ll be looking to give a brief overview of what it is all about and then compare it with the forex trading.
This will be beneficial to you especially if you are new to it and looking to start trading .
In simple terms, Binary options are types of trade options where the payoff (reward) received is either all or nothing at all. This type of option has really gained popularity in recent years with more binary options brokers appearing day by day.
In this type of trading, there’s no need to worry about liquidity and volatility of assets any longer when executing digital option trades. It fixed payout and there are only two possibilities in this type options. First, either the price of the current rate of asset will rise or fall within a specified time frame. Your ability to predict correctly, the result of your binary option trades will determine the reward you’ll get after the trade has expired.
Terms like “In the money” and “out of the money” are binary options jargons often used to denote when a correct prediction has been made within a specific time frame or incorrect prediction made within the same time respectively.
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Note: If your language is not English, you should use the language dropdown menu at the top right hand side of their page to select your language.
It is very simple to understand and use because the most important thing you need to know is to predict correctly, the asset’s trend direction within a specific time frame.
Assets traded in options could be stocks, commodities, indices and forex. Since it have expiry times and dates, your fixed return price is also known as the strike price.
What i consider best aspect is that regardless of how much the instrument or asset has moved, you are paid a fixed return on expiry provided the correct prediction was made. On the other hand, a trader who predicts wrongly on the asset’s direction will end up losing a fixed part of his or her investment or can even lose it all at expiration.
If a trader believes the market trend of an asset will go higher at a specific time, the trader would purchase a “call” while traders that believe the market trend of the same asset will go down for that specific time frame would purchase a “put”.
In both directions, you can make money by earning a fixed return on your investment provided the correct prediction was made.
For a call to make you money, the current price of the asset must be above the strike price at expiration. In the same vain, for a put to make money, the current price of the asset must be below the strike price at expiration.
One major advantage of trading options is that both the risks involved and reward are known. This simply means that it doesn’t matter how much he trade moves in favour or against the trader. One the factor is always certain, win a fixed proportion of your investment or lose a fixed proportion of the same investment.
Because of the high rate of return on investment often witnessed ( e.g 70%, 80% and up to 90% returns), one would think it’s a quick way to become very rich overnight. Don’t think that way because the major demerit is that the reward is always less than the risk staked on a trade.
You Can Also Read: Honest Reviews Of Option Bot 2.0
However, many binary option traders who apply the right strategies may quickly become rich 😆 .
Traders, especially newbie traders find it difficult differentiating between foreign exchange trading and digital options.
Though quite similar, both are not the same because they deal with different assets.
I don’t know about you but for me, I trade options most of the time and rarely trade foreign currencies. Even if i consider trading forex, i use free signals so that i won’t have to monitor my trades all day long.
To trade binary options, you need to register with a broker that offers quick support to its clients, high return on investment, simple and easy to use trading platform.
Yes, by CySEC
Accepts US clients
Suitable for beginners
High, up to 89%
Commodities, Stocks, Currencies, Indices
Since 24Option has been around in the market, they know and provide everything a beginner trader needs to be successful in options and i suggest you try them out if are still a new trader.
Although a minimum of $250 is required to start trading at 24Options, depositing more than that will ensure you don’t risk majority of your funds when trading.
You are more than welcome to tell us which one is the best between foreign exchange trading and digital options, which do you currently trade and any difference we’ve missed out above.
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