Binary options on or trading currency pairs?
Reading section of our forum about binary optionsWe were surprised to find that some of our participants, who have been trading (or trying to trade) on , are actively participating in discussions of binary trading as well. There are even messages in which it is clearly understood that derivatives work much better, only some slight modifications are needed. That is why ForTrader.org would like to discuss how trading in the foreign exchange market differs from binary options.
Other articles about binary options
- How to correctly determine the expiration date of a binary option
- 5 mistakes of beginners in binary options trading
- Types of binary options
So, as far as assets - sets are the same, and this is understandable, because the contracts are traded on the basis of currency pairs. Timeframes are also analyzed the same, trading is done around the clock. There is no difference.
Next, suppose, deposit. There is a clear advantage for binary options, because the size of the transaction can start from 10$, while on the we most often have to use the leverage provided by the broker, because the size of a standard 1 lot contract is 100 000$.
Market analysis in general can be left to the functionalityThe company already offers: more convenient terminals that are flexibly configured, an abundance of filters for analysis, a lot of developed strategies and even automatic trading. Binary options brokers usually only provide a web interface with a moving chart and a few function buttons. Therefore, if the trader does not have the analytical capabilities of the market, it will be difficult for him with the capabilities of BO.
In the process of trading I can't unequivocally give anyone the advantage. On the one hand, in many ways the simplicity of using binary options - You think, open a deal and wait, whereas trading currency pairs requires additional support for the operation: placing stop orders, modifying them. On the other hand, it is their simplicity that makes BOOs suffer - it is impossible to block a position or use pairs with high correlation for hedging, because profit and loss are predetermined anyway.
Another The disadvantage of trading binary options It is worth mentioning the impossibility to fully use some quite profitable strategies, such as martingale or multicurrency strategies. This is a significant limitation, especially if the trader is already used to them.
And, of course, let's discuss profitabilityIt is also impossible to give someone the advantage. On the one hand, when trading binary we know exactly our profit/loss when we open a deal and we cannot go into a heavy deficit, while gaining a significant advantage. But on the other hand, for long-term investors it is possible to miss a significant profit.
Surely you will find many more examples where trading on the foreign exchange market and binary options is different, because we named only superficial, explicit ones. Nevertheless, we can already make a few important findings.
First, the use of binary options is essentially profitable only for intraday traders, because profits from intraday trades rarely exceed 80%. Secondly, trading with contracts is convenient for beginners or those who have significant problems with emotions and closing deals according to the rules. Thirdly, trading currency pairs is much more diverse and interesting and gives much more opportunities to earn money.
In any case, everyone chooses their own approach to trading - no one prevents, for example, to open a deal with binary and immediately hedge her on . But that's another story altogether...