Binary Options and Forex: Common Features and Differences

Ted Capwell

In the financial market, there are many different methods of profit making and trading instruments, which, despite the relatively similar principles of work, offer certain advantages for investors. Today we will consider the common features and differences between the now-classic direction of investment activity – the Forex market and the innovative type of trade contract – binary options. We will analyze the capabilities of these tools and determine the list of advantages that they provide to traders.

Binary options and forex. What is better?


Trading on the Forex market

Technically, the work of investors in this sector of the market is built on the classical format of speculation in financial assets. Here, the trader needs a forecast for the forthcoming change in the value of the asset and draw up a contract for the purchase or sale based on an analysis of the trading quotations of a certain financial instrument. Speaking as simply as possible, the principle works here: it is more expensive to sell – it is cheaper to buy or vice versa. From the difference in the value of the asset, the investor makes a profit. At first glance, everything is simple and accessible. However, today classical methods of trading no longer completely satisfy the needs of investors. First, for a trader to receive a certain amount of profit, the quotes of the asset should change their indicators towards the forecast of the trader in a fairly large range. Even taking into account the leverage that is almost always used in this direction of trading, in order to get 100% of the profit under the contract, it is necessary that the price move away from the level of the transaction registration by at least 100 price points. The difficulty is that it is very difficult to generate such a forecast. In addition, when using forex contracts in trading, taking a profit takes a long time: sometimes market positions are open on the market for several weeks or months, while commissions are charged for each day of work of the contract with the investor! It turns out that without earning an income, the investor already incurs serious expenses.

And the last. Forex began to lag far behind in terms of liquidity from binary options. The standard level of profitability of this market for a simple investor today is up to 20% per year, which is a low financial indicator.

Binary Options

Despite the fact that this contract format is available on the market since 2008, it is still considered an innovative method of making a profit. If you deeply analyze its technical side, you can say that its algorithm is very similar to the mode of trading in the Forex market. Yes, here, as well as in classical trading, are used as an object of valuation of quotes of financial assets, the same principles of technical analysis of the market are applied, and profit depends on correct forecasting of quotations movements. But on this, perhaps, similar features of the tools end. Now about the advantages of options.

First, when trading with binary options, a trader does not buy or sell assets, as in Forex. Here, a trader concludes a deal to drop or increase the price of an asset. The volume of changes in the value of the asset here is of secondary importance, and only the direction of the market’s movement comes to the fore. Profit binary option brings the movement of quotations towards the forecast by only 1 point.

Secondly, in the binary market, each contract has a fixed level of profitability, which is known to the investor even before the deal is registered. At the same time, the volume of profit here can fluctuate from 65 to 90%.

Thirdly, options have a regulated period of action in the market, which is established directly by the trader. The range of the binary contract can range from 60 seconds to several hours. Thus, a trader can not only regulate the time of profit, but also effectively manage the trading capital.

Finally, due to the high level of profitability of binary options, high profit-making rate and the simplest mode of option operation, investors of this market can receive up to 3000% within a year.

Summarizing the article, you can clearly say that the innovative methods of trading, binary options, today are significantly ahead of the classic approach to profit forex market for absolutely all financial and technical indicators.


“General Risk Warning: Binary options trading carry a high level of risk and can result in the loss of all your funds.”