Forex vs. Binary: A Comparison
Forex and binary options are two most popular forms of online trading. In addition to the investors there are several new traders who find both the forms quite interesting but they are not really sure which one is more suited to their trading style or return goals. Such information is required by those who are looking to move from one market to another. Although both are online trading processes but there are differences between the two. If a trader is planning a transition then certain readjustments have to done to achieve success in the transition process. Besides, it is always helpful to know about the pros and cons of two of the most popular verticals of trading in the finance market. A comparison will help the intending trader to decide which form will return a consistent and better benefit on investment.
Let’s begin with risk management. This is one of the crucial factors for comparing Forex and binary options markets. In this context the experts will readily agree that binary is a better option over Forex. The latter has more risk involved in it as there are no contracts in this form. Moreover, the market is also defined by high leverage that increases the possibilities of higher gains as well as losses. If you are a beginner the chances are that you will be high loser while using leverage. Thus, the small number of gains will still lead to depleted accounts. As far as binaries are concerned, there is still some rays of hope that some of the money will be refunded. There are some of the best binary options brokers who will return up to 20% of the capital that is invested even when the trade expires. Another USP of the binary trading is the rollover feature which also helps the traders to deal with risk management. This process enables the traders to expand the expiration time that is yet to turn profitable. This flexibility definitely helps the traders.
The binary market is an easier place to trade as compared to Forex. It just takes four steps to provide information and complete the process. On the other hand, the Forex process is not that easy. The traders have to calculate limit and stop orders and position the asset types, lot size and price entry stages. The ECN platforms are more complex. This poses a problem for the new traders as they are prone to commit mistakes. If an error is made on a live account, the results are costly.
Another benefit of the binary options is that the payout structure is unique. This enables the traders to gain a risk to reward ratio that is preferred. It appears automatically when the account is opened. Thus, the traders already have knowledge on what they will win or lose even before the position is live. On the contrary, wins and losses are variable for Forex trading. Thus, it is difficult to predict for this kind of trading. Moreover, in this kind of trading the trader is directly responsible for all types of financial gains and losses. Without any professional help committing mistakes become easy. In addition to this, it is easy to open multiple trades in the same day for binaries. But you cannot predict how long it will take to open a Forex trading.
There is another disadvantage with Forex. If the trading environment changes not much flexibility is offered from it. Nowadays, the brokers are choosing to cater to the needs of the online retail traders. As a result the account sizes are more flexible and optional contract periods are available. More and more rules are being introduced to reduce the risks. No such initiative is observed where Forex is concerned.
Overall, the binary options trading appear a better choice than the Forex trading.