A lot of people have this misconception that Forex trading and binary option is one and the same thing. But it’s not!! The only similarity is that you can trade both but they are both traded in a different way.
In Forex trading, you profit when you buy low and sell high or when you sell high and buy low and how much you profit depends on leverage because in Forex there’s a thing called leverage, the more you leverage even if there’s a small moment, you can make a profit. In forex there’s a thing called called spread and some brokers charge spread , some charge commission and some charge a little bit of both. In Forex, a typical spread is 1.5 pips i.e. it is the smallest movement possible in Forex trading and what that means is that in any trade you’re not In profit until you clear that 1.5 pip.
However, in binary trading you just need to be correct about whether it’s going up or going down. You select a time frame, it can be 30 seconds, a minute, a day and at the end of it if the price finishes higher or lower and say if you predicted it to go lower say at the end of the day it goes down by just a pip, you still win the trade.
One minute trading in Forex and Binary Options
In binary options, if you pick the hour of the day where the market is moving very slowly, you’ve a high chance that in the entire time the price is going to move into the direction where you want it to be.
But in forex trading , in the same time frame it could possibly move in that direction but the movement will not be big enough for you to even clear that spread and as a result, if you clear both the trades binary and the Forex trade, at the end of that minute, Forex will make you a loss and the binary will make you a profit.
In Forex, even if you place a stop loss order you can’t be 100% certain that you will only lose your initial investment. Say you invested a $1000 and your Forex trade went bad, you could owe as much as $2000 to your broker before they sue you while in Binary options trading you always know the exact gain or loss before you even take a trade. Most binary options trader even allow you to fold your trade which means simply to sell it if your trade goes bad and that way you can avoid big losses.
In Forex, you never know that maximum profit . You can make a trade which can be good in some scenarios because you can make a surprise profit but majority of the time, it’s the other way round because of the variables involved such as slippage. And it can take years for you to make a profit.
In Binary Options, you know the exact payout of the trade you take and the exact loss return percentage if your trade finishes out of money. The majority of the Binary Options brokers offer an 80% return on your investment and sometimes even 400% depending on the time of the year. Say, you invested $500 on a winning binary option and you’ll return either $900 or $400 profit in as little as 60 seconds.
In Forex trading, you have to consider the spreads, the rollover swaps and if there’s any commission on your trades and obviously these factors can cut into your profit margins.
In Binary Options, none of these things exist and the amount you get paid out is the amount that you can take back home that very day.
Now, in conclusion, Binary Options are clearly the way to go. It is not that you can’t make money in Forex, it’s just that binary options offers a lot more such as:
- an easy platform for every trader to understand
- Lower risk on each trade which makes it easier to make a profit
- Bigger payouts, so that you can take home a serious paycheck each week
- It’s a combination of low risk and big payouts which is hard to find in any trading industry
- No trading costs, which means you take home exactly what you get
Now, don’t get too excited because there are lots of scams in the binary option industry, so this is how we recommend you to start it by obviously getting a legit broker!!