Binary options are an alternative method to be involved in the forex market for traders. Undoubtedly this is a relatively costly way to trade forex in comparison with the leveraged spot forex trading offered by an increasing number of brokers. But the major advantage of binary options over forex trading is that the maximum potential loss in binary options is constrained and known in advance.
While comparing forex trading and binary options, it is important to understand the differences and similarities. Although we have seen significant growth in binary options over the past few years and more and more traders and investors are getting into it. Nevertheless, it does not mean that it is the right choice for any trader.
Both forex trading and binary options offer huge profit potential, but they are quite different from each other. So, you must do thorough research and find out which one could be more appropriate for you before starting to trade. Here we gave a thorough comparison of both trading options that will help you decide which one is better for you according to your trading style and requirements read more.
What is Forex Trading?
Forex trading is the buying and selling of currencies on a global platform known as the forex market or foreign exchange market. It is the largest, most liquid, and actively traded financial market in the world. The average daily trading volume of the forex market is estimated at over 5 trillion USD.
Trading forex occurs in currency pairs and involves the prediction of movement between the two currencies; for example, US dollar vs Euro (EUR/USD). The value of currencies varies with changes in global supply and demand.
Key Features of Forex Trading
- The profits or losses are unlimited but you can authorize limits or stop-loss orders.
- There is no expiry time for trading forex.
- In comparison to binary options, forex trading is less diverse.
- Forex market operates 24 hours a day and 5 days a week.
- In forex trading, there exists a potential for high levels of leverage.
What are Binary options?
Binary options trading involves investing in an asset such as a stock, a commodity, or a currency for a predetermined period, normally between a minute and a few hours (longer expiry times are also possible).
Binary options are simply based on ‘yes’ or ‘no’ proportions- will the value of an asset go up or down in the predetermined period?
When a trader predicts a price movement, he exactly knows how much profit he will be able to make if his prediction is correct. If your prediction turns wrong, the trader will end up losing 100% of his initial investment.
Key Features of Binary Options
- Unlike forex trading, profits, and losses of trade are established upfront.
- The expiry time for binary options trades is also chosen upfront.
- The potential for leverage in binary options is very low.
- You can trade binary options only during fixed trading hours.
- A wide range of options is available.
Note: This is the best time to trade gold in South Africa.
