Similarities and Differences Between Binary Options and Forex
Until 2008, binary options were only a part of a larger trading market. Ever since this method became a separate trading market, many forex and stock traders decided to either include it in their trading practice, or they have even completely switched to it. What’s more, binary options are nowadays available not only to the experienced traders but for Internet users all over the world, no matter their educational and business background. Binary options brokers
offer on their platforms four different groups of assets to trade: currency pairs, stocks, indices, and commodities. Together with forex market, binary options are now the most available market for new traders and people who have no previous trading experience. There are some similarities between binary options and forex trading, their markets and trading platform, but there are also many differences between them.
Let us talk about similarities first. The most obvious similarity between binary options and forex is that both trading methods are based on online trading platforms. No matter where you are and how much experience you have in trading, you can create an account and trade forex or binary options on an online platform provided by a broker you choose. Another similarity lies in the fact that both trading methods should be regulated by official authorities in order to be considered reliable, and both binary and forex trading are regulated by the same regulation bodies. One of the best known such bodies is CySEC, which operates in Europe and most reliable online brokers have they license if they are considered legit. Then, both binary trading and forex allow small investments which do not exceed $100. This is especially convenient for the trading beginners because they will not make huge losses until they gain enough experience in trading. Another similarity is that both forex and binary trading allow trading on long-term and short-term periods, although the “long periods” are much longer with forex trading. The last similarity is that both these trading methods allow you to trade only at the specific time of day when the market is open for business.
When it comes to the differences, there are plenty of them between binary and forex trading. The first and the most obvious one is that forex trading allows you to trade only currency pairs, while binary trading involves them together with stocks, commodities, and indices. Then, binary trading is simpler than forex, it is more straightforward and it is easier to predict the result. Even without any knowledge of trading or market conditions, there is always a clear 50-50 chance that you will end the trade in the money. Another difference is that, with binary trading, a precise amount of earning is defined before you execute the trade, unlike with forex trading. When you trade on the forex market, if you end the trade in the money, you do not know until the end how much you will earn. Another difference concerns time. With binary options, it is crucial because the price is predicted and the trade is valid within a predetermined period of time. There is no time limit when you trade on the forex market – you can buy and sell currencies whenever the situation on the market seems suitable. Finally, the trading platforms of binary and forex trading differ from each other, together with trading robots designed for these types of trading.