Binary Options Trading on 2020 vs Forex Trading

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker!
    Perfect For Beginners!
    Free Trading Education!
    Free Demo Account!
    Sign-up Bonus:

  • Binomo
    Binomo

    Good Choice For Experienced Traders!

Trading binary options vs. Forex

If you’re looking to kick off your trading career, then you might have already seen the various instruments offered by Forex companies. The most popular of these instruments are binary options and Forex trading, and the choice between the 2 will determine how profitable you will become as a trader.

We have already looked at the history of binary options and how they work, but just how does this trading system stack up to its more popular rival, the Forex market. Both of these trading systems are recognized by regulatory bodies, and are the most popular option for the retail trader. Before investing your money with a broker, how about we look at arguments from both angles before making the leap:

In favour of binary options

There are certain reasons that make binary options very lucrative, and why more investors are choosing to invest in this market. Some of these are:

Variety of financial instruments

The Forex market only allows traders to work with foreign currencies, and trade currency pairs like the GBP/USD, EUR/USD, etc. Binary options, though, are not limited to foreign currencies – you can still trade currencies, but also get access to stocks, commodities futures, and indexes. More is always better, because as the trader you get a variety of instruments to work with and maximize your profit by hedging all these instruments.

Specified returns

With binary options, you know exactly how much profit you are going to get from the trade. Every trade you make is merely a speculation on whether the value of the stock, commodity, index or currency pair will either be higher or lower than its value at the time of the trade. Since there are only 2 options, win or lose, you know exactly how much you are going to gain or lose at the time of trade.

The advantage to knowing this information beforehand is psychological. A Forex trader has to spend time staring at real-time Forex charts as the markets oscillates up and down, and close the trade only when they feel satisfied with the result. As for the binary options trader, the stress ends once the trade is placed, and they can move on to another trade or other businesses depending on their trading strategy.

Security of funds

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker!
    Perfect For Beginners!
    Free Trading Education!
    Free Demo Account!
    Sign-up Bonus:

  • Binomo
    Binomo

    Good Choice For Experienced Traders!

Every Forex trader is wary of the moment they receive a margin call from their broker via email. When this happens, it requires that the trader deposits more funds into their trading account quickly to avoid losing their entire capital. This is a situation many Forex traders find themselves in during moments of financial turmoil like after major financial news announcements are made.

A binary options trader, however, doesn’t have to worry about margin calls because, as we have already seen above, the returns are specified and known. The trader knows right from the start that they are either going to lose their investment or gain the pay-out percentage specified by the broker. Some traders view this as a disadvantage, the idea that you can lose all your investment in a single trade, but it really isn’t.

Consider the period after the Brexit vote, or the time that came to be known as Black Thursday when the Swiss National Bank (SNB) de-pegged the franc from the Euro. These situations led to major losses for Forex traders, most of whom were stopped out. On the other hand, a binary options trader whose expiration date had not been reached would still be comfortable knowing that they were still in the game. Additionally, markets have a way of bouncing back from major market moves, so this provides added security to the traders’ funds.

Did I mention insurance cover for binary options trades? Well, you should know that insurance is also offered by some brokers for every trade, which helps you regain some of your capital, in case the trade is a loser. This takes away the risk of losing all your investment making your finances more secure.

Absence of financial costs

The broker already includes their profit into the pay-out percentage offered for each trade, which is why the pay-out is less than 100% and ranges from 67% to 81%. This crosses out any hidden charges which may be experienced in the Forex market in the form of spreads or commissions, and you get the exact profit you expected.

In favour of Forex trading

Just because binary options are so lucrative doesn’t rule out the Forex market as a lucrative financial investment. After all, why would there be so much volume being traded every day is it wasn’t a great alternative? Here are some of the reasons Forex trading is still so active and popular:

No need for huge initial capital

While binary options require a substantial initial deposit, you can get into the Forex market with as little as $100 or even less. However, this is not recommended because you become more prone to margin calls, but it’s a great start for someone looking to get a taste of Forex trading.

There are many Forex brokers in the world, and this has bred tough competition forcing them to lower their required initial capital and tightening spreads in order to attract investors choosing a Forex broker. Some of the brokers even offer bonuses as high as 100% on top of the capital deposited, essentially doubling your trading capital. These incentives attract first-time investors who would like to give Forex trading a try with as little as $100 initial deposit.

Multiple trades

Even with a small capital, a Forex trader is able to make many trades in a single day. This is called scalping, and enables even a trader with limited capital to earn huge profits. With binary options, this is difficult to do, since the expiration date for the trades is usually hours ahead.

Safety in numbers

Both the Forex market and binary options market are over-the-counter systems, meaning that there is no centralized system to monitor all trades, leaving room for crooked brokers to scam traders out of their money. However, there are still some differences.

The Forex market has been in existence for a very long time, and is monitored by various Forex regulators around the world. It caters to retail traders like you and I, but also to large institutions like hedge funds and mutual funds. Of late, there has been a proliferation of traders from all walks of life, and the Forex market is more robust than ever. The result, people share their experiences through real Forex broker reviews which point to crooked brokers. These networks of rating brokers keep them in check, and they tend to avoid getting a bad name.

On the other hand, binary options were only recognized by regulators in 2008, and there aren’t as many participants. As a result, there have been numerous cases of traders being cheated, and since there aren’t many reviews for binary options brokers, it’s difficult to find reliable binary options brokers. The Securities and Exchanges Commission (SEC) actually warned investors about binary options because they recognized this risk.

Variety of trading instruments

To make Forex trading even more lucrative, brokers have created various tools on their Forex trading platforms that help you maximize profits. Use of trailing stops, stop losses and taking profits all help to keep your trades manageable and to avoid margin calls.

Chances of huge returns

A Forex trader is not limited by an expiration date, and since the market runs for 24 hours, they can maximize their profits by holding on to winning trades. This is just not an option with binary options, because regardless of how much the markets move in your favour, the returns will always remain constant.

Which system best suits you?

After looking at the advantages of either system, you might still be wondering where you are going to make your stand, and this comes down to your personality. Looking at some of the common mistakes traders make, you will find that it’s got more to do with their personality than expertise, so here’s how you know where you fit in:

Characteristics of a binary options trader

Successful traders of binary options have certain attributes that lead them into this system instead of Forex trading. If you have these qualities, then binary options would be a good option for you:

This is the kind of trader who only makes a few trades at a time, or is involved in another kind of business and trading is merely a side-job for investment. The fixed expiration date for the trade at a particular time in the future is an advantage to this individual because they know exactly when they need to place the next trade.

Trades in the binary options system can be placed as far away into the future as the trader would like. This could be in terms of weeks, months or even years, which makes the system favourable for someone looking for a long-term investment strategy.

Substantial trading capital

Unlike the Forex market where a trader can get started with a very small capital of around $100, you need a lot more to get into binary options.

Characteristics of a Forex trader

About 90% of all Forex traders lose money, 5% of the rest barely eke out a profit, but there’s the last 5% of traders who make tremendous profits. These traders can be identified by the following characteristics:

To succeed in Forex trading, you must be ready to make time to study the Forex charts and Forex calendar. This could mean hours of staring at your computer screen before placing the trade, then following it up with patience as you watch the markets move.

Of the 90% of traders who lose money trading the Forex market, impatience is perhaps the most common flaw. Most of them will close a trade as soon as they notice it’s not going their way, only for the trend to turn around. To become profitable, you have to wait for a trade to ‘mature’, and then hold on to a winning trade for as long as possible.

Watch this animation for a recap of the differences between the two financial instruments:

Binary Options VS. Forex

The Forex (Foreign Exchange) market is currently one of the largest and most profitable markets in the world in terms of daily turnover. The foreign exchange market assists international traders and their investments, by enabling currency conversion. A significant part of the large turnover is contributed by online Forex trading, which has been steadily increasing over the past few years. This trend is expected to continue well into the future.

Binary Options trading is the new kid on the block. It is a new version of Forex market trading that is simple in comparison, which makes it the preferred trading method for new traders. Binary Options contracts have long been available and sold directly by the issuer to the buyer. They were generally considered “exotic” and there was no liquid market for trading these instruments between their issuance and expiration.

Since mid-2008, Binary Options websites have been offering a simplified version of exchange-traded Binary Options and people immediately embraced this new way of trading. Since then the number of traders and brokers kept going up, and now, I can safely say this industry has come a long, long way. Binary Options are now all over the internet and most online traders are using them one way or another.

In the early days, traders didn’t know what regulation was and because of that, brokers didn’t seek regulation. Now the most reputable brokers are fully regulated and traders have become more careful with their money so a regulated broker is their first choice. In the early days, the types of binaries were limited to Up/Down and maybe a few others but the choices were very few. Now brokers go out of their way to offer new and innovative types of binary options such as Ladder Options, Pair Options (Pairs existed before but now a lot of brokers are offering them), Touch, Boundary, Above/Below, etc. (some of these were available in 2020 but only a handful of brokers had them and now almost all brokers offer them). Overall the binary options industry has changed a lot and most of it is for the better. I believe we are not done yet and that we will see even better advances, more safety and a lot more professionalism from brokers in the near future.

What are the Key Differences Between Binary Options and Forex?

Making a comparison between Forex trading and binary trading is not easy as they both have their own advantages over the other but here are some of the main differences:

Binary options – Set And Forget

A Forex trade has a lot more variables than a binary options trade and this means that the trader is faced with a lot of decisions. Lots of decisions also mean that you can screw one up and one is all you need. You have Stop Loss, Take Profit, position size, etc. and as a Forex trader myself, I can tell you it can be terrible to see price one pip away from your Take Profit just to turn around and go straight to your Stop Loss. If you widen your Stop Loss, you can lose more, if you tighten your Take Profit, you can win less… but a smaller win is better than a loss, right? Or wrong…? See, lots of decisions, while on the other hand, a binary option trade is set and forget, there’s not much you can do after you open it. And on top of that, a single pip (or point) is all you need to win a trade, which brings me to the next difference:

One Pip Is All You Need

In Forex, the more price travels in your favor, the more money you make (or lose if it goes the other way). With binary options, things are different: it doesn’t matter how far away price travels because you can get the entire payout even if the price is only one pip higher or lower than it was when you opened the trade. One pip brings you 85% profit, 10 pips bring you 85% profit and 1 million pips bring you… yup: 85% profit. Of course, the payouts differ from broker to broker and this 85% was only used as an example.

Ease Of Use

Forex trading requires professionals with experience in foreign currency trading while Binary Options is quite simple and easily understandable even to novices in financial trading. This simplicity makes Binary Options more appealing but do not think you don’t need to learn anything. Education is a big part of success in trading and this applies to binaries as well. If you’re in need of education, visit our Binary Options School.

Know Your Risk And Reward In Advance

With binary options, you know right from the start how much you are going to make if your trade is successful: the payouts range between 60% and 85%. In Forex trading, the returns are uncertain and can only be determined after the closing of a position.

Refunds

Binary Option trading is safer compared to Forex trading. With Binary Options, some brokers offer up to a 15% refund in case of losses, which acts as a cushion for the Binary Option trader. Forex trading has no safety precautions in place (if you don’t use a Stop Loss order or other forms of protection) and in cases of wrong investment decisions, the Forex trader may lose all money invested.

Time Is Money

Forex can be traded continually throughout the weekdays while Binary Options can only be traded if the underlying market is open. Say if you want to trade binaries on stocks, you have to wait for the stock market to open. However, it must be noted that you can trade binaries on currency pairs and that means that you can trade around the clock during weekdays.

Range Of Markets

Binary Options offer a lot more assets. Forex stands for Foreign Exchange so obviously, only currencies can be traded, but when it comes to Binary Options, the choices are wider and include stocks, indices and commodities on top of currencies. More choices, more opportunities.

Regulation: We Need It

The Forex industry has a lot more regulation compared to Binary Options. However, in the last couple of years the top Binary Options brokers started to pursue regulation and this is a major step forward for clients’ safety. Before opening a binary options account, make sure you know as much as possible about Binary Options Regulation.

Leverage: Increase Risks And Rewards

Forex is leveraged and this can be both good or bad, depending on how you look at it: you have the potential to ma more but also you risk more. Binary Options are much simpler in this regard, because they are not a leveraged product.

Binary Options VS Forex – Bottom Line

Although they are differentiated by the aforementioned features, Forex market and options trading have some similarities. Both are easily accessible to the public since they can be operated online. What is required of potential traders is simply a network connection and start-up capital that can be as little as one hundred dollars.

Overall, nearly anyone can join this revolutionary way of trading. However, some binary options brokers are not regulated, which can potentially lead to some traders being taken in by scam artists. Beware, do your research and pick the right trusted binary options broker for you.

Best Binary Options Software

Jay Hawk
Contributor, Benzinga

Are you a binary options trader looking for the best software platform for your trading strategy? Interested in hands-on research about binary options, binary trading software and the brokers who offer binary options trading?

Remember, not all binary options brokerages are created equal, so be sure to carefully consider your needs and the security the broker provides before you start trading or investing in binary options.

Table of contents [ Hide ]

Overview: Binary Options

Binary, or digital, options come in several varieties and are often the simplest financial derivatives to trade. Binary options can yield a fixed amount of cash or the price of an asset as a payout if the buyer’s market view turns out to be correct.

Binaries offer buyers limited downside risk or premium cost in return for a limited reward or payout. On the other hand, binary sellers have limited downside risk equal to the payout and limited upside risk equal to the premium received.

Binary options allow traders to speculate on a wide range of underlying assets, some of which include:

Similar to regular options, binaries which take a bullish or bearish view on the underlying market can be referred to as call or put binaries, respectively. These simple digital options are sometimes also referred to as up/down, high/low and above/below binaries.

Furthermore, one-touch, barrier or trigger binary options pay out when their barrier level trades in the market prior to expiration, while a no-touch binary gets canceled if its barrier level trades.

Other popular types of binary options are inside/outside range binaries. The inside range binary pays off if the market stays inside the specified range, while the outside range binary pays off if the market ends up outside the specified range. Range binaries can also be structured with trigger points.

As their name implies, binaries generally have two possible outcomes through expiration or cancellation. The outcome obtained depends on the underlying asset’s price at expiration or sometimes prior to expiration in the case of one-touch or no-touch binaries that can pay out when a pre-specified barrier level trades in the market.

In the simplest case, if an at-expiration binary option is in the money at expiration, then they provide a fixed payout to the holder. Alternatively, if they are out of the money at expiration, they typically return nothing.

What to Look for in a Great Binary Options Platform

The right trading software can make a substantial difference in your profitability as you deal with options, and binaries are no exception. In general, a great binary options trading platform will have the following features:

  • Supports fast and efficient execution in the types of binary options you want to trade.
  • You can compute the fair value of all the options you are interested in based on implied volatility.
  • You can compute the Greek risk management parameters of individual options and of your portfolio of options based on a particular underlying asset.
  • Displays individual option profit and loss profiles in a graphical format.
  • Shows price charts of the assets you want to trade and computes a variety of technical indicators, including historical volatility.
  • Lists the price, open interest and implied volatility for each option series or chain.

Most binary options brokers have a web-based platform so you can view a series of assets on and select tenors, strikes, triggers and types of binary options to trade in a specified amount. These platforms usually lack any significant analytical or risk management capability.

Furthermore, some brokers that do offer binary options, such as Binary.com, will let you use the exceptionally popular third-party MetaTrader 4 or 5 (MT4/5) software from MetaQuotes. This gives you the notable benefit of having all of the technical analysis, news feed, backtesting and programming capabilities and allows you to enter binary options trades with a supportive broker.

Red Flags to Consider Before You Open an Account

Although binary options are a bona fide and limited risk derivative financial product and are suitable for individual traders, the retail binary options market has, unfortunately, had its share of issues due to unregulated and disreputable brokers. This has led to restrictions on the availability of binary options in some jurisdictions, so traders should beware of scams which involve poorly regulated brokers.

As you select a binary options broker, watch out for some of these red flags that can signal a possible problem with a broker:

  • Claims or promises of high rewards
  • Many client complaints or bad reviews
  • Warnings about trade manipulation or irregularities
  • Clients have issues getting their funds back from the broker
  • Weak or unavailable customer support
  • Reports of dissatisfied customers

Our Top Picks

Benzinga has looked over the field of binary options brokers and selected a few reputable broker choices for traders who either plan on specializing in binary options or who want to execute binary options as well as other assets through an online broker.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker!
    Perfect For Beginners!
    Free Trading Education!
    Free Demo Account!
    Sign-up Bonus:

  • Binomo
    Binomo

    Good Choice For Experienced Traders!

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Best Binary Options Trading Guide For Beginners
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