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Forex Vs Binary Options

Published by Usman Ahmed, MBA (Researcher)

Reviewed by Bowen Khong, ACCA

Both binary options and forex trading can help traders make quick profits. 

However, some significant differences amongst them might not fit the trading preferences of all investors. For example, high leverage, flexible market hours, and profitability makes forex trading a preferred choice for high-volume traders. 

On the other hand, risk-averse traders might prefer trading binary options due to low trading cost, limited risk, and less volatility. 

In this piece, I’ll compare them side-by-side to help you select your favourite market. 

Accessibility

Forex

Since the forex market remains open round-the-clock, traders can access it any time, five days a week. Not to mention, currency trading is accessible even on weekends with limited functions. Therefore, traders have more flexibility to find trading opportunities at their convenience.   

Binary Options

On the other hand, investors can trade binary options within the standard market hours. 

Risk

Forex

Due to multiple geopolitical reasons, the prices of underlying securities keep changing frequently. 

Also, the demand and supply factors make currency trading unpredictable. Therefore, the forex market is known to have high volatility levels with increased risk exposure.  

Binary Options

Binary options are less affected by internal or external factors due to short-lived trading. Usually, traders close their positions between 10 to 60 mins. 

Therefore the volatility does not impact binary options trade significantly. Also, the funding cap makes the binary options trading less riskier as compared to forex trading. 

Profitability

Forex

The increased volatility of the forex market offers excellent potential to make quick profits. Also, leverage trading can help traders to maximise their returns exponentially. However, high leverage can also lead to significant losses. 

Binary Options

Unfortunately, leverage trading is not available in binary options that make it less profitable than forex trading. 

Trading Cost

Forex

Forex trading involves fixed and floating spread costs. Sometimes brokers also charge commissions on different tradable assets. In addition, other fees such as account inactivity fees, interest on overnight positions make the total cost vary. 

Binary Options

Contrary to forex trading, the cost for trading binary options is relatively fixed. Therefore, traders can precisely know the cost and the final payout even before entering a trade. 

Degree of Control 

Forex

Traders can open, close, or modify their positions anytime in currency trading. However, the control flexibility is also open to committing foolish mistakes. Moreover, other factors such as slippage issues or downtime of a broker’s platform remain out of a trader’s control. 

Binary options

Binary options trading comes with a higher degree of control. Besides predetermined profits and losses, investors can select the trade expiry. Therefore, the margin for trade error is undeniably low as compared to forex trading. 

Diversity

Forex

Forex traders have lower choices available even though many currency pairs are available to trade, including majors, minors, and exotic pairs. Nearly 80% of forex traders prefer to trade seven major currency pairs, such as EUR/USD, AUD/USD, GBP/USD, USD/CAD, USD/JPY, and USD/CHF. [1]

Binary Options

In contrast, traders have a wide range of financial markets to explore when trading binary options, such as stocks, currencies, commodities, etc.

Final Words

When you compare forex and binary options, it is crucial to consider several factors that could affect your decision. 

For instance, traders who seek higher profitability and greater flexibility might find forex trading more suitable. 

On the other hand, quick profits and low-risk seekers can try their fate into binary options trading. 

Usman Ahmed, MBA (Researcher)
Usman Ahmed, MBA (Researcher)
Usman Ahmed is a currency trader and financial market analyst with more than 7 years of active trading experience. Besides holding a Masters degree in Business Administration, he has worked for some of the most renewed companies in the forex industry including FXCM, IQOption, MetaQuotes, Alpari, FXStreet, DailyFX and several others. Usman possesses strong technical analytical skills and is famous for his very own, informative and entertaining, writing style. He believes in naked chart trading analysis that is commonly known as price action trading. He follows global financial news and macro-economic events very closely.
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