Both the Forex and the Binary options trading are relatively new phenomena in financial markets. While Forex trading was in previous years already Banks and Institutional Investors, and was only opened by the Internet retail investors by specialized brokers, binary options were traded on OTC trading platforms for the first time in the year of 2009. The question act binary options or forex, can not be a yes or no answer, both instruments have advantages and disadvantages. Here predominate for many traders, even the binary options advantages.
1.) What are the advantages of forex trading?
Forex trading involves pros and cons
- Forex is a lever business, which makes it possible to trade with small sums large volumes.
- The amount of the possible winnings is theoretically unlimited.
- Disproportionately high gains through leverage possible.
- In trading currency pairs traders can speculate on rising and falling prices.
- Currency trading is the world’s biggest market every day with a volume of more than 4 trillion dollars.
- By the time shift can be traded virtually around the clock.
- Due to the high liquidity, more trading opportunities than is the case with other markets arise.
- In forex market, many expert opinions and market views are to be found. In this way, investors can very extensively about the price movements.
Conclusion: The Forex trading holds for traders many advantages. The profits can be very high due to the leverage effect and the high liquidity of the market in this area of online commerce. In addition, many experts opinions traders enable a variety of information on current exchange rates.
2.) The drawbacks in forex trading
- Closes the forex brokers do not explicitly the obligation to its customers, it may be that a poorly running Trade losses theoretically exceed the capital invested. In this case, funding obligation.
- Trade limited to currencies, alternatively may have to be resorted to CFD trading.
- Broker will charge for the so-called spreads.
- Trading requires a profound knowledge of the different economies and monetary policies of the central banks, as political decisions also affect the rate of a currency.
- The leverage effect not only high profits but also big losses can be realized.
- Due to the high liquidity of the forex markets, with an unfavorable price development the invested capital can be used up within a short time.
Conclusion: The forex trading but does not only bring advantages. Trader should be well aware that not only can turn profits high, but in turn can also lead to large losses. In addition, some knowledge of the different economies and monetary policies of the central banks of advantage because policy decisions may affect the rate of a currency.
3.) That speaks for trading binary options
- The underlying assets in addition to currency pairs both equities and indices and commodities are considered.
- Loss limit is possible. Refrain Trader on the maximum loss may be only the capital actually used.
- There are no commissions for the broker.
- Although the binary options trading has to be learned, however, that trading in this segment is much less complicated.
- The trading is done already with significantly lower initial sizes. Depending on the broker, the minimum bet for a trade in the classical trading is only between one and 25 euros. Losses thus fall out of not immediately dramatic, if not an extreme risk taken.
- The brokers offer different trading opportunities, the gains have been announced before the start of the option.
Conclusion: The binary options trading should be limited by the low entry sizes and the possibility of losses, especially for beginners suitable. Trading is easy to learn and much less complicated than the forex trading.
4.) What are the disadvantages are clear?
- Should an investor to hedge or is not offered by the broker, the entire capital investment at a wrong rate forecast is lost.
- In most cases, the potential profits are indeed known in advance, but also limited.
- In order to trade profitably in the long term, a relatively high hit rate is needed.
- On weekends only the high-yield trading is possible, classical business with short maturities takes place only during market opening times.
Conclusion: Avoid trader at a hedge against the risk or provides trading provider not available, it can result in financial loss even when trading binary options. Potential gains are limited and long-term profitability only at a relatively high hit rate.