- If you are a newbie in trading then it might be a very difficult choice for you to make as to which type of trading to go for: binary options or forex. Though both are online forms of trading but are relatively different from each other.
What is Forex:
The Forex market is the largest market in the world and is based on change in currency which makes the market unpredictable. The Forex market is a decentralized market and many currency pairs are traded. It involves buying, selling and exchanging currencies at the different prices. The market is open 24 hours a day and for 5 days a week.
What is Binary Options:
In Binary Options you have access to invest in many different assets such as commodities, stocks and currencies. Binary Options trading is a bit different from the Forex trading.
Difference between forex trading and binary options trading:
- When talking about the forex market, then yes the forex market does affect when the market is volatile either low volatile or high volatile. Traders might be at the complete win and could get an opportunity to make profitable trades or they could face a major loss. As said, the forex market is a completely unpredictable market. Therefore, to overcome such volatility, a prior risk management is very important in order to save your trades from huge losses.
A sudden volatility does not affect the binary options if you plan yourself in advance and invest in assets accordingly as per the assets and the expire dates.
- In forex trading, there are different timeframes for trading, whichever trader chooses to. It could be for a second to months depending on the choice of the trader the trades could run for the specific time period chosen by the trader. Traders here can open and close the trades as per their wish.
In binary options, binary trades have a particular timeframe. Here traders can not decide when to open and close the trade. Each and every binary option has start and end time therefore, traders need to select when the order expires before the trade starts because at the expiry time the trade itself closes.
- Forex trading has four main currency pairs but there are even more currency pairs to trade on in the market depending on what trader wishes to trade on.
Binary options got variety to trade on such as commodities, stocks as well as currencies. So it depends on the trader as to which one to trade on.
- When we talk about risk then, in forex trading the risk is unpredictable as compared to the binary options trading. As forex trading offers more variability therefore, the risk involved here is unknown. Therefore, in order to protect themselves from risks and losses, traders should put stop loss while they run trades so that they could protect their capital from loss. Proper risk management can save the trader from having major losses.
While, in binary options trading, traders already are aware of the profits and losses and hence the risk involved here is low as compared to the forex trading. Traders here enter the market and wait for expiry time. Though here the profits generated could be lower as compared to the forex traders.