What is the difference between forex and binary options?

Ted Capwell Updated:

The growing popularity of online trading, which has been observed over the past decade, is inextricably linked with the emergence of new terms, definitions and financial transactions. Of course, this process is an objective regularity of the development of the presented direction of commercial activity, but there are issues whose solution requires the participation of the subjects of the world financial market. First of all, it concerns the terminology and legal aspects of this issue.


Comparison of binary options and forex options


For example, a novice trader, studying the basic descriptions of cryptocurrency, can find the definition that the PTS and other altcoins are a unique means of payment that can replace fiat money in the near future. But in another source, he finds information that the term “securities” is more appropriate for cryptomonet, and some financiers call them a program code that is subject to ownership. With regard to this review, readers need to immediately understand that the Forex market and Forex options are different categories, which are united only by the object of operations performed – currency pairs. Other characteristics, scope, transaction mechanism, etc. they are different.

Binary Options Review

The tool in question (although many economists argue that the term “rates” is more appropriate for BO gamblers) is an operation that gives the right to buy or sell an asset, at predetermined prices, for a certain period of time. That is, concluding such a deal, the trader does not become the owner of any material assets. Unfortunately, this factor allows scammers to use BOs to apply various fraudulent schemes.

The history of binary options does not begin in our time, as some traders believe, even in the 17th century. in Europe, agreements were made to buy / sell tulip bulbs at fixed prices during certain periods of time. Then they introduced securities options (London Stock Exchange), and starting from the 2nd half of the 19th century, most of the operations with BOs are carried out in the USA (Chicago option exchange).

Starting from 2008 (the rules for handling BO, their classification, scope, etc.) are created, options become one of the main tools for online trading. Many traders understood that BO is a highly profitable object of investment activity, but in parallel with the growth of their popularity, negative phenomena were also observed. A simple algorithm for working with options began to attract the attention of users who have never been interested in the economy. As a result, the trading tool was increasingly associated with the usual game of money. In some countries, BOs appear in bookmakers, and where there was no legislation regulating the mechanism for the use of options, trading platforms have emerged that were designed to deceive gullible traders.

Naturally, the current situation did not suit either traders or decent brokers, which made them unite to jointly fight against scammers. This led to the prohibition of binary options in the EU and Israel, as well as significant restrictions on operations with BO in Australia, Japan, India, etc.

BO classification

Modern binary options are classified according to different criteria, which allows traders to study the features of a particular direction of investment, without being distracted by common questions.

Two main types of BO:

• Betting. They are used by brokers to perform the necessary operations online. But only reputable companies provide their customers with the opportunity to enter into transactions that correspond to the real situation on the market. Scammers independently “draw” graphs, analytical tables, etc. they need.

• Exchange or real options. These tools provide real transactions when the buyer is looking for the seller of interest. In this case, it is impossible to determine the amount of potential profit.

Depending on the type of forecast, the following BO’s are distinguished:

• Up down. It is necessary to show the direction of change in the value of the asset.

• Touch / touch. The trader determines whether the price of the asset reaches a certain level, or this does not happen, before the end of the selected period.

• Range. The price should either hold within the selected interval, or leave it.

You also need to highlight the varieties of BO, which are classified by underlying asset: forex / currency, stock, commodity and interest BO.

Forex (currency) options

A large selection of currency pairs provided by broker companies allow traders to choose an operation for which large investments are not needed, which can be considered the first difference between the considered instruments and other BOs.

Currency options provide an opportunity to insure the risks of classic purchase / sale transactions in the Forex market. This feature also highlights the options under consideration from similar operations on other underlying assets. On currency exchanges, a trader has the opportunity to carry out operations with a short maturity date.

After a detailed analysis of economic news, you have the opportunity to conclude several transactions that compensate each other, allowing you to stay in the “plus”, regardless of subsequent events in the foreign exchange market. Other binary options can not be used by a similar algorithm.

Work on the currency exchange, including the implementation of operations with forex options, unlike other markets for financial assets, allows you to control the situation, using for these purposes numerous sources of information. This nullifies the likelihood of fraud by traders, scammers who provide their clients with fake schedules, reports, expert forecasts, etc.

And one more important reminder, always pay attention to the marketplace where you are working. The main criteria for selection are the “age” of the brokerage company and the availability of a license / certificate issued by authoritative regulators of financial markets.


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