Forex markets

The basics of trading: how Forex differs from binary options

The basics of trading: how Forex differs from binary options
Newbies who decide to master the popular profession of a trader often cannot understand what is the difference between the Forex market and binary options, because not only assets coincide, most strategies are easily adapted to the specifics of a particular instrument. In fact, the differences are significant, they should be taken into account if you want to make money on fluctuations in the value of currency pairs, stocks or raw materials.
What you need to know about Forex
Trading on the exchange is based on buying one currency for another. The market is a virtual platform for transactions, ensuring the stability of the global financial system. There are both private individuals with minimal capital and large players: banks, international corporations, hedge funds. To connect to the platform and open a deal, you need to register with an intermediary broker.
Features of the Forex market:

    availability of leverage, which provides the trader with additional resources. For example, if the value is 1: 100 per dollar, you can make an operation for $ 100. In return, part of the capital is pledged (margin);

    closing a position at the request of the account holder. An investor does not have to wait until the price reaches the stop loss or take profit level. The broker is obliged to execute the order immediately;

    choice of lot size. A standard lot is equal to 100 thousand units of the base currency. So, in the EUR / USD pair, it is 100 thousand euros. When choosing micro lots, it should be understood that the amount of profit is proportionally reduced.

    Profit (loss) on a Forex trade is the difference in points between the asset price at the time of purchase and the closing price (taking into account the broker's commission or spread). To be in the money, a trader must make a correct forecast as to whether the specified instrument will fall in price or rise in price.
The basics of trading: how Forex differs from binary options

The basics of trading: how Forex differs from binary options

Binary options: concept and principle of work

The word “binary” means that the buyer of the contract will either lose the entire bet or receive the income specified in the terms of the deal. The investor's task is to guess whether the quotes will be higher or lower than the current ones after a fixed period of time, called the expiration period. Even insignificant volatility guarantees the accrual of a premium of 60-90%.

The main types of binary options:

    “One touch” - the trader will make a profit if the price reaches the declared level at least once within a certain period;

    “Higher / lower” - it is necessary to predict whether the asset will become cheaper or more expensive;

    “Range” - the price must cross the level and stay outside it ”;

    “Ladder” - according to the terms of the contract, several levels are established. The more lines the quotes overcome, the higher the income.
Binary options are not a full-fledged exchange, the main function of the platform is that the broker accepts bets on the outcome of an event.
5 Key Differences Between Binary Options and Forex Earning

Each of the two tools is specific. Having understood both the intricacies of option trading and the peculiarities of concluding transactions on Forex, a trader will learn to diversify risks and achieve the maximum result.
So, here are 5 main points that best demonstrate the difference between popular types of trading:
1. Scheme of generating income
In Forex, as in the regular market, the rule for speculators is “Buy cheaper - sell more expensive”. Instead of products and material values, metals, oil, currencies, indices, etc. act as assets. The more points you managed to get, the more profitable the deal.
For digital options, only one thing matters: whether the price moves in the direction of the forecast. The amounts of the premium and possible loss are known in advance.

2. Variety of types of deals
Forex provides only a contract for difference (CFD), while options offer more choice (“higher / lower”, “touch”, “range”, etc.).

3. Risk management
For many traders, digital options look more attractive than the foreign exchange market, but it is easier than ever to drain a deposit in a short period of time, especially if you have neither skills nor special knowledge. Forex is the best option for beginners due to the availability of effective tools that help to minimize losses (stop loss, trailing stop), besides, the position can be closed at any time.

4. Leverage
Margin trading is one of the main advantages of the Forex exchange. The leverage reaches 1: 1000, significantly expanding the possibilities of the holder of the deposit. There is no such “bonus” in binary options, the investor can operate only with the amount that is in his account.

5. The time factor
Forex orders do not need to be closed if there is no need to. Long-term deals sometimes hang for weeks or even months. Option trading is limited by strict time frames: after the expiration period, the rate will be calculated automatically, so it is so important to rely on technical analysis, take into account fundamental factors and adhere to the recommendations of the trading strategy.
Millions of users around the world successfully make money in the Forex and digital options market. They are attracted by a free schedule, 24/7 access to the platform from a computer or smartphone, a low entry threshold and other advantages of remote work. Each type of online trading has its own pros and cons, so the final choice in favor of one of them should be made based on individual preferences. The key to success is constant learning, practice, commitment to discipline and the ability to control yourself regardless of the circumstances.

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