Binary Options and Forex Trading What You Need to Know

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Binary Options and Forex Trading: What You Need to Know

If you’re looking to get into investing, it’s good to know what you’re talking about. After all, this is your money on the line.

Two investment opportunities we see new investors curious about are binary options and Forex trading. Both options have their pros and cons, while still offering investors a unique financial opportunity.

However, binary options and Forex trading are not targeted at the same demographic. We’re breaking down all the differences you need to know.

Binary Options and Forex Trading

Binary options are essentially just trades made on capped markets with capped potential. They’re low risk and low reward, which makes them very attractive to new investors.

They also provide relatively good odds to double or triple your money.

Forex options are very similar.

They work by trading on currency, which is also a commodity. However, Forex options offer a much more complex trade.

How They Trade

Binary options trade on many different commodities, while Forex are exclusive to currency. In fact, Forex stands for foreign exchange market.

The difference here is that binary trades are much easier to speculate on. The sheer amount of markets allows newcomers to pick something less volatile and complex than currency.

The geopolitical aspect of currency makes Forex trade speculation difficult.

Limits vs. Limitless

Binary trades happen by buying or selling an option. Each option is either priced or open to investment, depending on the type of binary option. Binary options also have time limits.

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For instance, let’s assume the speculation is on whether the price of gold will rise above $1,000 by 4:00 p.m. today.

Binary traders buy the option and hope that the price of gold rises above $1,000 by 4:00 p.m. If gold rises they receive a return, and if not they lose their money.

Forex trading works similarly, but with much more speculation.

For example, an investor buys EUR because the price of EUR vs. USD is rising in favor of the EUR. They buy EUR currency and wait out the prices raise, then convert it back into USD for profit.

Unlike with binary options, there is no time limit or set value.

Forex traders speculate not only on whether currency prices will rise, but also on how much they’ll rise. The potential to double your money and then lose 2/3rds is possible with Forex trading, but the rewards are limitless.

Margins

One large difference between binary options and Forex trading is margins. Forex trades offer margins while binary trade do not.

Put simply, brokers offer margins to allow increased investment capital. They accomplish this by pooling investor assets.

For example, a 1:1000 margin would give $1 the purchasing power of $1000 dollars. This makes increasing capital on winning investments very easy.

Most Forex trades are difficult to manage for beginners, but margins help tip the scales towards smaller investors.

Wrapping It Up

All in all, the differences between binary options and Forex trading create an intimidating skill gap.

Binary options are for the less experienced trader, while Forex offers more return with more challenge. We suggest using binary options as a stepping stone into the world of Forex trading.

If you’re looking for additional information about binary options, look no further. Our website is packed with everything from broker information to new binary strategies.

Binary Options

What are binary options

A binary option is a type of option with a fixed payout in which you predict the outcome from two possible results. If your prediction is correct, you receive the agreed payout. If not, you lose your initial stake, and nothing more. It’s called ‘binary’ because there can be only two outcomes – win or lose.

Advantages of binary options trading

Aside from the simplicity of its ‘yes or no’ proposition, binary options trading is also very flexible. It gives you the ability to trade:

  • All markets

Trade on underlying markets that include Forex, indices, commodities, and more.

  • All market conditions

Predict market movement using up/down, touch/no touch, and in/out trade types.

  • All durations

Take a short-term or long-term view with trade durations from 10 seconds to 365 days.

  • All payouts

Earn payouts up to USD 50,000. Losses are limited to your initial stake and nothing more.

Why you should trade binary options with Binary.com

Enjoy an award-winning online trading platform with trading conditions that are ideal for new and experienced traders.

Award-winning online trading platform

  • Simple and intuitive
    Enjoy a trading platform that’s easy to navigate and use
  • Instant access
    Open an account and start trading in minutes
  • Available 24/7
    Trade when you want. Our Synthetic Indices are available even on weekends
  • Patented technology
    Trade with the industry pioneer and holder of a patented pricing technology
  • Security and privacy
    Trade confidently, knowing that your personal data, transactions, and funds are always secure

All conditions and durations

  • All markets and conditions
    Trade currencies, indices, commodities and more in rising, falling, sideways, quiet, and volatile markets
  • Short to long-term durations
    Choose timeframes from 10 seconds to 365 days

Competitive and transparent pricing

  • Sharp, benchmarked prices
    Receive prices that are benchmarked against interbank rates
  • Transparent risk and potential reward
    Know how much you will win or lose before you purchase the contract
  • Protect your profits
    Sell your long-term contracts before expiry to protect any profits you may have made or to minimise your losses
  • Two-way pricing
    Receive quotes for a trade and countertrade, so you always get unbiased, transparent rates

Ideal for new and experienced traders

  • Low minimum stakes
    Deposit as little as USD 5 to start trading
  • Trade according to your preferred strategy
    Trade based on “gut feel” or rely on technical and fundamental analysis
  • Flexible
    Choose from over one million possible trade variations at any time, and customise your trades according to your preferred strategy
  • Scalable
    Earn the same proportional return on stakes of all values

How to trade binary options

Binary options trading is relatively easy. You can purchase a contract in just three steps:

How to Trade Binary Options as a Beginner?

Binary trading requires basic knowledge, patience and common sense. In this article we guide South African traders through all the steps necessary to place a successful trade in binary options.

As always, we recommend trading only with regulated and trusted brokers such as IQ Option for added benefits such as a free demo account, $10 minimum deposit and only $1 minimum investment. For more brokers, see our broker page. Let’s get started.

What Are Binary Options?

Binary options are nothing else but a prediction of an asset’s price direction in a prespecified amount of time. The price doesn’t have to go too high or too low for traders to make a profit. All they need to do is predict whether the closing price will go higher or lower than the opening price as shown in the figure above.

If the price stays the same, then traders receive their investment back. If the trader predicts correctly, then the profit made can go up to 91% depending on the broker and the asset. On the other hand, if the prediction is wrong, then the trader loses the investment.

Example of a Binary Options Trade

Step 1: Register with a trusted binary broker

Registering with most binary brokers takes only few seconds. All you need to do is fill in the boxes with your email and a password. You also have the option to continue with your Facebook or Google account or simply fill in your personal details like name and surname.

Step 2: Practice with the free binary options demo account

Practice binary trading with a free demo account available to South Africans, before switching to a live account in order to get familiar with the binary trading platform. In this section there is a detailed explanation on how to place a successful trade with the legendary IQ Option platform. Once you feel ready you can switch to live binary trading which is done exactly in the same way as explained here.

Select Asset

To start with, traders need to select their asset from the drop-down menu as shown here. A large selection is available as always by IQ Option.

Set the investment amount

Then, set the investment amount as shown below by clicking on the amount box at the right-hand side of the trading platform. This can be as low as $1 so that novices can start trading with a low investment capital.

Set the expiry time for the binary option

Once the investment amount is set, traders need to select the expiration time. There are binary options available from 60 seconds to the end of the month as shown below. You can even see that the profit percentage changes according to the expiration time. Longer expiration times will offer lower returns.

Once you choose the option’s expiration time then, you can place as many binary trades as you wish.

Choose the direction you expect for the price in the future (Higher or Lower)

This can be done by choosing the price direction, either by clicking on the higher button if you believe that the price will go higher than the opening price.

On the other hand, traders can click on the lower button if they believe that the closing price will be lower than the opening one as shown here.

Wait for the binary option to expire

Finally, you wait until the expiration time comes and if you have won then, the amount will be shown in a green box as shown in the picture below.

Step 3: Make a deposit and switch to live trading

Making a deposit even in South Africa is pretty simple and requires only few minutes of your precious time. Simply click on the green deposit button at the right top corner as shown above and follow the instructions. You are now ready to start trading.

Risk Warning: As always, we inform our readers that trading involves risk. Always invest funds that you afford to lose.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Choice!
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    Free Demo Account!
    Big Sign-Up Bonus!

  • Binomo
    Binomo

    Good Choice For Experienced Traders!!!

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Binary Options Trading Guide
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