In a way, binary options and forex trading share the same principle. They are usually traded over the internet, without any physical presence of traders. But while forex trading is conducted in one go, binary options allow traders to play the markets every time to take profit. You can execute them at any time of the day with a minimum of capital.
Both forex trading and binary options offer a high chance of making money, but the way they are structured can be quite different. Let’s take a look at the key differences between the two.
1. Beyond Even a 30% Risk of Loss
A binary option is a type of option where you can invest in either a long or a short position. If the option goes in your favor, you will win a certain amount of money. On the other hand, if it doesn’t go in your favor, you would lose a portion of the investment you made.
In a trading strategy, you can always make money, no matter if the market goes up or down. The same logic also applies to binary options trading, as well as forex trading. However, in a binary options strategy, there is also the chance of your trades not going in your favor.
2. Trading Strategy
A binary options trading strategy involves placing bets on whether an outcome of an event will take place or not. In forex trading, you place orders to buy or sell a given currency. You can decide on the direction the price of a given currency will move.
Unlike a binary option, when you buy a forex position you aren’t investing in its upside potential but its downside risk. Therefore, it is possible to choose a forex trading strategy that would protect the initial investment. It also helps to get succeeded with the hot forex broker.
While binary options offer you the option to place an unlimited number of trades, forex trading is limited to only a certain number of trades per day. However, when it comes to binary options, there are no limits. The only limitation here is the time you can invest in forex trading. You can buy/sell as much as you want, as long as the trading strategy allows it.
Binary options, on the other hand, are mostly tied to one chart, the price of the underlying asset. Therefore, if the trade doesn’t go your way and you have no other way of salvaging the loss, you would have to fold the entire position and go away.
4. Size of a Trader
It is common knowledge that forex traders who trade more often do better. This is one of the key factors that determine how profitable a trader is. On the other hand, binary options traders don’t need to trade much to make a profit.
A trader who operates a small-sized binary option, even if they are making significant money, wouldn’t have to make more than 5 trades per day to earn a decent amount of money.
In the modern world, forex trading and binary options trading are becoming popular ways of making money. But there are many differences between the two. If you want to win more money, you should use these two types of trading strategies for your forex trading strategy.