The Difference Between Forex Trading And Binary Options Trading

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Oftentimes, a winning idea is not a new idea; it is the combination of several old ideas in a new way. And that is the way I view things. I am always trying out new things even when I don't see what the likely end will be; my mindset is one of expanding my mind and detecting winning combinations of ordinary ideas.

That is why if you read my blog posts, you can't predict what I'll write about. My interest is close to boundless and I follow it.

This week I have been doing a lot of research on improving my forex trading strategy and learning binary options trading. Binary options trading is a newer alternative to forex trading. It took me a while wrap my head around it. I once opened a binary trading account last year but abandoned it as I didn't fully understand how it works. But yesterday, I gave it some serious reading.

Surprisingly, it is easier and simpler than forex trading. And I have decided to test the waters there with real money. I have opened an account with about 6 different brokers, will pick the best (specifically, the most Nigeria friendly as I don't want to hear stories/restrictions when I want to withdraw my money). 

And as usual, I will use a robot. Already signed up for two auto-trading robots. Will use the best (for me and my situation). I don't have time to do anything outside my core business -- business data analysis. It's because the auto-trading robot worked well for my forex trading that I am opening the binary options account with the intention of handing it over completely to a robot.

And for people who are confused about the difference between forex and binary options, I have copied here the best detailed explanation I could find online while doing my own research. I will be sure to share how it all turns out in maybe a year.



Forex definition: When trading Forex you are speculating that the value of one currency will increase or decrease compared to another, in an attempt to make a profit. For example: The current price of EUR/USD is 1.30850 and you think the price will increase in the future. You buy 1 lot of EUR/USD and wait for the price to increase to the point where you want to close the trade and realize the profit you want.

Binary Options definition: When trading Binary Options you only have to predict if the price of an asset (for example currency pair or stock) will increase or decrease from its current price over a certain period of time. For example: The current price of EUR/USD is 1.30850 and you think the price will be higher in the next hour. So you place a “Call” option on EUR/USD and wait to see its price 1 hour from now. If your prediction is right you can make a profit of 80% of your investment.


Forex: You can use margin to trade Forex. The maximum margin is determined by each broker, and sometimes can be up to 1:200 or 1:500. Margin allows you to increase your investment capital so you can make a larger trade and make a larger profit if your trade is a winning one.

Binary Options: Margin is not used when trading Binary Options. You can still make a large return on your investment (up to 80% or sometimes 400%), so Binary Options are still very attractive for traders. The good news is that you can never get a margin call.


Forex: With Forex you never know what is the maximum profit you can make on a trade. You can set a limit or stop order so that you can be guaranteed a certain percentage profit if the limit or stop is executed. The losses in Forex can be managed with limit/stop orders, the same way profits are managed. The maximum loss with Forex may be all of the money in your trading account.

Binary Options: Before you make your trade you will know exactly what is the payout and loss return percentage that you will get for the particular option, when it expires. Some brokers offer payouts up to 80% or sometimes 400% depending on the option traded. This means that if you invest $500 on an option and the payout is 80%, you will make $400 profit if the option is a winning one. Some brokers don’t offer “loss back”, which means that if your option trade is a losing one, you will lose the amount you invested in the trade, but not more.


Forex: You choose when to close the position. You can close your position anytime the market is open and the broker has to accept and execute the order.

Binary Options: Before you make your trade you have to select when you want the option to expire (example: 1 hour or 1 week from now) – at the “expiry time” your trade will close automatically. The broker offers you different types of options with predetermined expiry times. Some brokers allow you to close your trade early, but you will exit your option at a percentage of the expected return. The “early closure” option is not offered by all brokers, and might not be available during the whole time the trade is active. Another important point to mention is that some brokers allow traders to delay the expiry time, to the next expiry time. This is called “Rollover” and the traders will need to increase their investment by a certain percentage, sometimes 30% in order to be able to do this.


Forex: There are a variety of order types in Forex. The most important ones are the market (Buy/Sell) orders. Also there are more advanced orders such as: Limit, Stop, OCO (One Cancels the Other), Trailing Stop, Hedge orders, and others.

Binary Options: There are about five Binary Options types which you can trade. They include: High/Low (also referred to as: Call/Put or Up/Down), 60 Seconds Options, Touch/No Touch Options, Boundary Options, and Option Builder.


Forex: Some brokers allow you to trade micro lots, which is 1,000 units of the base currency in a Forex trade. The maximum trading amount is determined by each broker, and can be up as high as 100 standard lots or $10,000,000.

Binary Options: Each Binary Options broker determines what is the minimum and maximum trading size for its clients. Sometimes the minimum trading amount can be as low as $5 per trade, and the maximum can be up to $1,000 or $5,000 or more.


Forex: When trading Forex you have to consider what are the spreads and rollover/swap, and if there are any commissions.

Binary Options: There are no spreads, rollover/swap or commissions when trading Binary Options.


1 comment:

  1. Thanks Boss for sharing this as well. It is an eye-opener as usual. I am sure of this: you won't run short of knowledge and relevance the way you share knowledge, just for free.
    Thanks for being there.


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