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.
