Forex and binary options are increasingly becoming an interesting alternative to already established investments for private investors. Since it is not possible to generate a significant return with interest rates, trading is becoming increasingly important. However, financial derivatives are also very risky compared to other financial opportunities. This is something all aspiring traders should be aware of before they actively participate in online trading forex or binary options. Although high returns are often promised in advertisements for alluring products, the risk should not be ignored. So while you may not incur unexpectedly high losses when trading derivatives, we have taken a closer look at binary options and forex trading and in this article explain the most important similarities, but also the differences between the two forms of trading. .
Both types of business bear a strong resemblance to each other.
Basically, forex trading and binary options are very similar. This is not surprising because, among other things, Forex trading was a role model for the development of binary options. These were created some time ago, as there was a need for a simple financial product for beginners. The sought-after financial instrument should offer the advantages of Forex trading and at the same time be simple enough that it can also be understood and used very quickly by laymen. Binary options have been very successful in implementing these ideas.
Binary options, like Forex, have the potential to help traders improve their chances of winning through targeted price analysis and thus be profitable. For both the products, it is important to determine the course of the price in advance in order to be financially profitable. Compared to trading currency pairs, binary options have been simplified a lot. While in forex trading the exit can be decided at any time, for binary options it is decided from the start. Also the potential profit is already decided, how high the course rises or falls only with forex, but not the role with binary options.
Both financial instruments also show similarities in profit and risk potential, as high profits are possible in a short period of time, as well as total loss of the entire deposit. Both forex and binary options are highly volatile and therefore considered highly speculative. Thus, only money should be used, the loss of which does not cause much damage to the trader, whether trading binary options or forex.
Binary options vs. forex why should you choose a variant
Binary options are easy to understand and the trading platform can be serviced quickly even by beginners, whereas forex trading has some additional options, making it more difficult to learn. Since the two financial instruments are otherwise very similar to each other in many ways, it is in theory quite possible to trade both binary options and forex, as knowledge of one area can be an advantage when trading one product with the other. Is. However, there are very few successful traders who trade both options permanently. Not because it’s not possible, but because it doesn’t make much sense. Profitable trades can be found in both areas to satisfaction, so that it is not necessary to add another financial instrument to the number of trades concerned. Both are high variance products, so there is no mutual compensation of risk involved. Hence it is advisable to choose forex trading or binary options and specialize accordingly, as all the time and energy available to the user can be focused on one product, so as to reap maximum profits.
Beginners can easily go into trading with binary options
With binary options, entry is particularly easy, as there are only a few decisions to be made per trade, the rest follows automatically. Even as a newcomer to binary options, the handling of the software is quickly learned as well as the at first simple analysis methods can be easily understood and applied thanks to the many brokers’ free training materials. Could In this way, active trading can be started quickly and possibly the first profit will be made sooner. This easy entry point is often recommended starting with binary options if the question is binary options vs binary options. Forex is in the room. Many traders who today trade Forex professionally, CFDs or even futures have started with binary options and made their first profits there.
But with all the nice features and easy availability for beginners, it should never be forgotten that binary options also come with a high risk of losing everything. So beginners may see trading as a good start, but should always only use money that they consider to be risk capital and can be easily lost without serious impact on their financial situation. Many brokers advertise exclusively with advantages and only point at high loss risk in small print.
Binary options require no additional funding
Binary options have another great advantage over forex trading: traders can only lose what they paid as bets in current trades. If the money for a trade is not in the trading account, the trade cannot be placed. As a result, no more money than the client’s trading account can lose.
This may sound obvious, but it is possible with forex losses that go beyond the account balance. Currency pairs are usually traded at fairly high levels, allowing traders to accumulate multiple times in the financial market. If the loss in the open position exceeds the current account balance, there is a margin call and subsequent automatic closing of the position. This is to prevent the trader from losing more money than is actually available. In most cases this works, but when there is high volatility, it may happen that a position cannot be automatically closed in time and the loss is much higher than the client’s account balance. Due to the so-called margin requirement, the trader must now balance his account balance. Since the additional payment required in extreme cases may actually equal many of the credits deposited, not only the deposit, but in some circumstances even the existence of the customer is at risk. To avoid this risk, trades can only be terminated with a stop loss, which guarantees timely closure of the position at a predetermined loss.
Forex Trading or Binary Options – Where More Profits Possible?
There are winners and losers for both products, but the number of losers is significantly higher. To be successful in dealing with financial instruments over the long term, a high degree of discipline and a continual broadening of horizons is essential. Only a few of the initially enthusiastic newcomers are able to create conditions for successful trading in the long run.
When deciding whether to choose the better binary options or forex to trade, maximum profit should not be the deciding factor, as both types depend on many different factors and should not be considered as a binding statement on which product to use. Can be given more profit is possible.
On the other hand, in forex trading the nose is clearly ahead. Here, fees are usually calculated from spreads that represent the difference between the buy and sell price of an underlying asset. In some cases, spreads are even replaced by comparatively smaller commissions. Binary options do not charge a direct fee, but the broker makes a lot of money from the difference between the money he pays for a won trade and the money he takes on a losing trade (usually the full bet). Here, the payout is usually only between 80 and 90 percent, while in case of loss 100% of the stake will be taken. Some brokers pay even less.
Try Both With Demo Account
Binary options vs. Forex traders can operate without the use of real money. With a free demo account both forex as well as binary options can be tested on different brokers. Therefore the differences can be experienced and the trader can decide for himself, after extensive tests, which financial instrument suits him best. It is advisable to trade free demo accounts until a clear preference for binary options or forex crystallization, only to later open a real money account. Thus, the loss “try” is avoided and each trader can gain experience in both areas before making their decision.
role of brokers
The choice of an online broker is crucial for the expected profits. Whether it is a broker for forex trading or binary options: the terms can vary greatly and each trader should be very careful when comparing each provider to find the most suitable trading account for him. In addition to the cost of trading, which has a direct impact on traders’ profits, above all the severity plays an important role. Whether trading in Forex or Binary Options, a secure and reliable broker is essential to make any profit from trading. Always ensure that a broker has a valid license and is regulated by a tax authority. EU regulated brokers have the advantage of being bound by strict MiFID guidelines and are therefore favored by most professionals.
Binary Options Difference Forex: Our Conclusion
When asked whether forex trading or binary options is the better option, there is no clear answer. High profits, but very high losses are possible with both financial instruments. This can go up to the loss of the entire deposit, in some circumstances even a Nachschussflift will have to be met with forex trading in case of loss. Therefore, one should always only use money that could result in great hardship or restrictions for the trader to lose. Trading these highly speculative products is thus only suitable for traders who have suitable capital at their disposal, with which they can trade freely and who are not determined to do other things. For both products, trading is possible even with very low minimum deposits.
Before registering with an online broker for binary options or forex, it is important to verify that it is a reliable and reputable provider. These include testimonials from other broker clients, information about reliable regulation and a thorough reading of the terms and conditions, as many dubious brokers hide restrictions that may prevent them from doing well.
It cannot be clearly determined whether forex trading or binary options is your best bet. Each trader has to determine this for himself according to his personal capabilities and needs. However, it is not advisable to trade both the instruments in parallel, switching to the other product at any point of time is a big problem. Many successful traders change their preferred trading product over the course of their careers as they develop their own skills. or there are other conditions of change in personal or financial condition.