There are many ways a trader can profit in forex markets, but binary options forex trading combines the best elements of the two (binary options and forex trading) into a potent mixture designed to make money. Although this innovative alternative is a bit less cost-effective than straight forex trading, especially if leverage is involved, the fact that both profits and losses are “set in stone” i.e. not subject to change is a welcome relief for traders burdened by stress and uncertainty.
Binary options vs forex
With binary options, you get to make money on securities without actually owning them, meaning you do not own the losses they incur either. On the other hand, you don’t get to claim their potential profits, either. In other words, you are not affected by actual price of a financial instrument, but by any changes in the price of said financial instrument. You try to predict general price movements and buy options accordingly. You can always close early if you deem the situation merits it, potentially even affecting the odds and making money even in more volatile markets – especially in more volatile markets. Your costs, winnings and potential losses are calculated in advance, so you can always make an informed decision on whether or not to proceed.
When talking about regular forex trading, things are far less certain. Winning, losing and their extent are all unknown and variable, coming down to little more than a speculation – much like everything else related to forex and other financial markets.
However, if we apply binary options approach to forex markets, results can be quite astounding. Rather than buying currency pairs, this alternative enables you to place bets on price movements of more popular currency pairs. Rather than predicting the extent of price change, you need only predict the general direction – statistically, a lot easier challenge. With good quotas, you could get more than a 50% return on your investment. On the other hand, is you lose, you lose your investment (100% of the money you put down), but since you control how much you invest, you essentially control your own losses.
Flaws connected with binary options forex trading are inherent to binary options in general. They come with an expiration date, which significantly lowers your chances of winning. If there were no such limit, the price would eventually have to reach your prediction, so where is the fun in that? You win more often, but the total amount you can win – or lose – is capped. The same predicted financial outcome could yield a lot (as in hundreds of times and upwards) more in virtually any other financial market or case other than this. Of course, the losses could also be many times greater, but who trades to lose money, anyway? Most binary options markets are unregulated, so the possibility of scam can be high; so make sure you have your bases covered at all times, just in case.