Forex trading and binary options trading are similar in some ways, yet are quite different in others. When trading Forex, contracts related to currency pairs are bought and sold. Typically, these transactions are completed quickly, with any profits being determined by the current currency value and investment amount. There are contracts involved with binary options trades as well, but there are no fluctuating profits or losses. Instead, a pre-determined profit amount is earned when the trader is able to accurately predict the upcoming direction of price movement for a chosen asset.
Both forms of trading provide traders with the opportunity to generate large profits from relatively small investments. With Forex trading the only asset option is going to be currency pairs. When trading binary options, currencies, stocks, indices, and commodities are available. No stake or shares are ever purchased, only time-sensitive contracts that once expired end any connection to a selected asset. There are only two potential outcomes when a contract ends, profit or loss of the investment amount.
Ease Of Use
One of the main differences between the two is the ease of getting started. For the novice trader, Forex trading often involves a substantial learning curve, while the basics of binary options trading can be mastered in about an hour. Those who have already spent some time trading within the FX markets are highly likely to find success when trading digital options, especially if they choose to trade with currency pairs. Any knowledge of currency price movements will prove most helpful.
The risk levels are going to vary quite a bit, primarily due to the fact that profit and loss levels are basically unlimited when trading Forex. Stop losses can help quite a bit with putting a cap on loss amounts. When trading binary options, the loss amount on any trade can never exceed the investment amount that you have decided upon. However, profit amounts can never exceed the offered return rate. Even if the asset price climbs (or falls) substantially, the only thing that matters is whether or not the price is higher or lower than the entry price when the contract expires.
Which To Choose?
Many traders choose to use both forms of trading as a means of generating income. The two can compliment each other when currency pair analysis is applied within each investment platform. Should you be trying to choose between the two, consider factors such as start-up costs, broker fees, and the complexity of the overall systems. Both provides benefits and drawbacks. What it all comes down to is personal preferences and whether you feel that either Forex trading or binary options trading is going to provide you with a higher level of overall profit.