Comparison of these two types of trading will be performed according to a number of the most important parameters:
A variety of types of contracts
On Forex, there is only one type of contract. No, of course, you can trade in currency pairs, CFD contracts, commodities or securities, but all these are just variants of the same type of contract – a contract for difference in prices (CFD – Contract For Difference). You bought a currency pair and its price has increased, you will receive the difference between the purchase price and the subsequent sale price.
There are several types of contracts on binary options : this is the most common “higher / lower” that we have already examined, it is a “touch option” where you need to wait for a certain level to be reached, “range option” where you need to specify the target price range, and the most profitable is the “ladder option”.
The amount of potential profit
At Forex, your profitability is unlimited. Of course, you can limit it to placing fixing orders, but if we talk about a simple directional transaction, then it can generate your profit until you close it yourself at the price you are interested in. There are frequent cases when you make a deal, and in just a few minutes the price flies by a huge number of points, bringing you much more profit than you expected.
When trading binary options, your profit is always limited by the type of contract selected. And, most importantly, your profit can never be greater than your rate. If you bet $ 100, you will receive, in the best case, $ 90. If you lose, you lose all $ 100. Of course, there are options for other types of contracts, however, in any case, the proportion of success will always tend to be unprofitable. But the dealers of these options are always in profit.
An example of how binary options work cunningly:
- We’ll make a bet, for example, at AUD / USD at $ 1000, at the moment of pressing the “buy” or “sell” button, the bet size of $ 1000 is immediately deducted from my balance.
- If I guess the bet, then I’ll see that “the profit was $ 1710”, while in fact, it was $ 710 ($ 1000, as we remember, was debited from me at the time the bet was opened, and when I guessed it, it returned).
- If I didn’t guess the bet, then I’ll see that “the profit was $ 0”, but I already lost $ 1000, and in case of a miss, these funds will not be returned to me.
It looks just fine, but in fact, the loss of the same option is always more than profit.
In Forex, with the same transaction and the equivalent price movement up or down, profit/loss will also be the same.
Margin trading opportunity
On Forex, margin trading has perhaps reached the highest degree of development. Forex brokers give you leverage in almost any range, from 1 to 2 to 1 to 1000, and even more. Of course, such a colossal amount of credit capital provides us with virtually unlimited opportunities for profit, which, sometimes, is 1000 times higher than our invested capital.
On binary options, there is no such thing as margin trading. Everything is limited only by the concept of rates. If you have $ 100, then only for these $ 100 you can make operations. This is an absolute minus in the modern realities of trading.
Ease of conclusion of transactions
At Forex, it is believed that the simplest and most modernized system of the conclusion of transactions among all exchange markets. A transaction closing system is understood to mean a process from the analysis to the moment your order is placed on the market. There are various trading platforms, some with advanced functionality, however, understanding them is not difficult.
On binary options, the transaction system is even simpler than on Forex. In essence, the whole transaction comes down to choosing a trading instrument, such as an option, execution time and pressing the “buy” or “sell” button. We will not talk about the effectiveness of such an operation, but the chances are about 50/50.
The duration of the transaction
At Forex, all contracts are perpetual, and therefore, they do not have a circulation (expiration) term. This means that when we enter into a transaction, we can wait until the price is not where you expected it to be. Yes, there are commissions that can do much harm, but this is no longer the topic.
On binary options, all contracts are urgent. All types of options have a limited lifespan, so “waiting out the storm”, like in Forex, will not work for you. This type of contract completely excludes the investment component, leaving us only pure speculation.
Minimum starting capital
At Forex, this line is now almost erased, and you can start trading, even having only $ 10. But you should understand that the smaller your initial investment, the greater leverage you need to take from your broker, and this greatly increases the risks.
On binary options, the minimum starting capital is even the size of $ 1. But in this case, your income will be just as minimal. Perhaps for a person who wants to just get acquainted with these contracts, this is quite enough.
Taking into account everything that I talked about above, we can summarize a small result:
This is a stock market in which, like the stock market, like other stock markets, the laws of supply and demand apply. Transactions are concluded at various time intervals, however, as statistics show, transactions over long time periods are most effective and more often profitable. At Forex, much attention is paid to technical and fundamental analysis. There are a huge number of different systems for managing active transactions, which allows you to profit even from completely hopeless transactions. The proper use of margin trading can greatly increase your investment capital, which will allow you to get much more profit. Naturally, success in Forex requires market analysis, a trading strategy, experience and the use of informational materials. This market cannot be conquered abruptly.
The binary options market is an OTC market, or rather, it is not a market at all since binary options brokers are both liquidity providers, market makers, and generally everyone they wish. In most cases, the quote is just a projection and has nothing to do with the real price of the asset. And in the case of “turbo options”, brokers simply draw the quote that they are profitable to give against the pool of their players. In fact, a binary options broker is a bookmaker that broadcasts what it wants to its customers. A high commission for a profitable transaction makes the popular 50/50 exchange ratio completely unprofitable since you will never earn as much as you invested. The profit on the same option will always be less than the loss. In general, a binary option is a pure casino or an addictive game, which has nothing to do with real trading in financial markets. Options are a game according to the rules of the host. You can check on a demo account of any binary options broker.
In this article, I have set out solely my opinion, which is supported by practical experience in the development and implementation of various exchange contracts. I really like the model of the “real exchange option”, which I consider to be the best of all exchange contracts, only it has nothing to do with the “binary option”. What tool to work with – you choose. And I just have to wish good luck and profit!