With the measurement of trading volume, the foreign exchange (forex) market can be seen as the largest asset class all over the world. Some estimate that the trading volume approaches $4 trillion every day with the majority showed by spot transactions and swaps. Trading currencies – or technically, currency pairs – is complicated seems to be the problem for most casual investors interested in forex. It has a substantial degree of risk, and also the number of capital at stake is seldom clear. Thus, it is the reason why many people have started to trade FX binary options as an alternative, totally bypassing the traditional foreign exchange market.
By simplified, FX binary trading is to be a ‘one or the other’ choice. With this example, you are selecting ‘up or down’ for the currency pair, EUR/USD. It is easy by design.
On this page, we aim to introduce you to use binary options for trading currencies. In spite of forex trading shares many similarities with FX binary options trading; there are still several major differences. Therefore, here is a chance for you to learn about them.
It’s useful to get familiar with how currencies are traded in the first place in order to completely appreciate these differences as well as understand why forex binary trading is preferred by a lot of traders.
An Introduction Trading Currency Pairs
In case someone says that he or she trades currencies, or is involved in the forex market, it means that person is usually referring to trading currency pairs.
For instance, the person might trade the Euro against the British pound, or the Japanese yen against the U.S dollar.
The trade clearly involves the buying of one currency and the selling of the other. When the market for both currencies changes their exchange rate with each other, the trade will be profitable or unprofitable. As you trade currencies against each other, it is certainly that you are asked to buy the currency pair. Each pair that you buy shows your position in the underlying currencies with respect to that specific trade. Also, you have a right to sell the pair to get out of (for example liquidate) your position at any time, supposing there is a buyer.
As below, you’ll see that there are a few aspects of the traditional forex market making the trading FX binary options far more attractive. But, before we get there, it’s helpful to note the similarities between the two.
It is clear that both involve risk. Every time you carry out a trade, it has the uncertain degree regarding the movement of the exchange rate of currencies. Otherwise, everybody would trade FX binary options as benefit would be guaranteed.
Additionally, both also involve the same basic mechanism. In detail, you’re taking a position in the two underlying currencies of the pair long in one and short in the other.
Both forex binary trading and conventional forex trading ask for an understanding of the factors having an impact on the rate fluctuations among currencies. Commonly, such influences can be economic, political, or based on market perceptions.
Here, we see the similarities finish. And now, we’ll have a look at how both forms of currency trading are not similar to one another.
Binary Options Trading Poses Less Risk Than Forex Trading
In spite of trading currency pairs by binary options involves risk, doing like this by the forex marketplace involve far more.
With the case of forex binary trading, it helps you know upfront how much capital that you might lose or profit on each trade. In addition, you can know the number of how much you stand to profit. For conventional forex trading, it is considered that neither is known. A lot of forex traders have held their positions in losing trades, and they hope for a turnaround, just to see their whole capital base erode. This does not occur when trading forex binary options.
Besides, there are many people involved in the forex market use leverage for the aim of increasing the potential benefit that they can make on a given trade. The increase o f the potential loss can be recognized as the disadvantage of using leverage. We see that more than one foreign exchange trader has declared bankrupt because of over-leveraging his position in a losing trade. With binary options trading, this scenario is infeasible.
More Flexibility In Choosing Asset Classes
With trading currency pairs, you can also trade indices, stocks, and commodities by binary options. Furthermore, you’ll get better access to these trades since it is not require you to buy the underlying assets. Simply, you’re only taking a position based on the movement of the price of the asset throughout a specific time frame.
For instance, you don’t need to risk the capital required to buy shares (currently $600+ per share) if you wanted to trade Google stock. Alternatively, taking a position for as little as $10 at some binary options brokers will be better for you.
You not only have access to stocks and other types of asset when trading binary options, but there are also various types of instruments that you can trade. For instance, you can carry out touch/no-touch, up-down, high-low, as well as boundary binary options. These instruments can offer you various ways to benefit on your currency pairs.
With up-down binary options, they are seen as a simple bet on the direction of the currency pair’s price. Besides, touch/no-touch trades are a prediction of whether the price will “touch” a certain level before the trade expires. Moreover, high-low binary trading involves a bet on whether the price of currency pair will finish above or below its strike price. In addition, boundary (range) binary options are a forecast regarding whether the price will finish inside or outside a given range at the time that a trade expires.
Binary Options Trades Expire More Quickly
Another superiority of forex binary trading is that you can be in and out of a position far more quickly than is the case of most forex trades. From the earlier time, trades in the forex market can be held for a long periods. So, this traps your capital, and prevents you from placing it to use in other trades.
In contrast, FX binary options allow coming with a predetermined expiry time. We see some trades expire within an hour. Also, others expire within 15 minutes. Moreover, others just expire within 60 seconds. Therefore, the short duration of the trades permits you to carry out more of them every day.
Trade FX Binary Options At The Following Binary Brokers
You’ll realize that most binary options brokers give some level of forex binary trading. But, there are also a lot of brokers that you would recognize and decide to avoid them. Some mail makes a payout to their members very slowly and it often takes several weeks to do so. Also, others supply little to no customer support. Still, others give very few currency pairs to trade. Thus, they severely limit your choices. However, the below four brokers have been reviewed and tested, and have shown promise in the areas we consider crucial.
First of all, 24Option offers impressive payout percentages, some of which climb past 300%, so 24Option is really one of the most appealing brokers in the binary options space nowadays. Honestly, you can expect a potential return beginning at 75% on most trades, whether they are stocks or currency pairs. Also, you can access to several stocks, indices, commodities, as well as different option types, for example range, one-touch, and high-low instruments. The lowest deposits at 24Option are $250 with the minimum trade amounts set at just $24. You can visit 24Option.com today to get more information and get started.
Secondly, we recommend you to begin with TradeRush. It is a fact that many beginning FX binary options traders choose TradeRush because they have an ability to take positions for as little as $10 (after a $200 minimum deposit). Specially, this is also one of the few brokers offering 60 second binary options. For several currency pairs, you can trade a long list of stocks, commodities, and indices. And the potential returns on most trades range between 70% and 81%, however, a few one-touch options carry returns up to 500%. When you visit TradeRush.com, you can use promo code “BINARY101” supporting you to open a free no-deposit demo account.
Thirdly, Banc de Binary also offers $10 binary options trading, and it is widely regarded as one of the safest and most reliable brokers online. It helps you execute touch/no-touch options and call-put trades. Besides, you can use their OptionBuilder feature in order to customize your trades. The potential payouts range between 70% and 90%, still again, some instruments carry returns up to 500%. Visit Banc de Binary and take the time to get familiar with the trading platform.
The last one is AnyOption and it gives you access to one of the most impressive lists of asset types that we’ve found. Specifically, you’ll find more indices and stocks available here than at most of their rivals. In spite of payout percentages for most trades are at the low finish of the industry, just between 65% and 71%, you’ll get a 15% refund on trades expire out of the money. It is a remarkable advantage supporting you to manage your capital. You can visit AnyOption.com today and open your account. And you can do so with a small $100 minimum deposit.
It’s significant to know that trading currency pairs profitably, whether by the traditional forex market or binary options, is not easy. Everyone would do it if making a profit were easy. As saying before, when you’re ready to test the waters, it can be better if you begin with the four brokers above.
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