Thursday, 3 December 2015

Forex VS Binary Options

Forex Trading VS Binary Options Trading

The Forex (Foreign Exchange) market is currently one of the largest and most profitable markets in the world in terms of the daily turnover. The foreign exchange market assists international traders and their investments, by enabling currency conversion. A significant part of the large turnover is contributed by online Forex trading, which has been steadily increasing over the past few years. This trend is expected to continue well into the future.


Binary Options trading is the new kid on the block. It is a new version of Forex market trading that is simple in comparison, which makes the preferred trading method. Binary Options contracts have long been available and sold directly by the issuer to the buyer. They were generally considered “exotic” and there was no liquid market for trading these instruments between their issuance and expiration. Since mid-2008, Binary Options websites have been offering a simplified version of exchange-traded Binary Options. Currently the number of binary option traders are few compared to their Forex trade counterparts, however, market gurus are optimistic that with time the numbers of both binary option brokers and traders will increase exponentially.

*Update December 2015: They’ve predicted an increase in the number of both binary brokers and traders… Wow! How right they were. Now, almost 4 years since I’ve first written this article, I can safely say this industry has come a long, long way. Binary Options are now all over the internet and most online traders are using them one way or another. In the early days, traders didn’t know what regulation was and because of that, brokers didn’t seek regulation. Now the most reputable brokers are fully regulated and traders have become more careful with their money so a regulated broker is their first choice. In the early days the types of binaries were limited to Up/Down and maybe a few others but the choices were very few. Now brokers go out of their way to offer new and innovative ways of trading, such as Ladder Options, Pair Options (Pairs existed before but now a lot of brokers are offering them), Touch, Boundary, Above/Below, etc. (some of these were available in 2012 but only a handful of brokers had them and now almost all brokers offer them). Overall the binary options industry has changed a lot and most of it is for the better. I believe we are not done yet and that we will see even better advances, more safety and a lot more professionalism from brokers in the near future.


What are the Key Differences Between Binary Options and Forex?

Deriving a comparison between Forex trading and binary trading is not easy as they both have their own advantages over the other but here are some of the main differences:

Forex trading requires professionals with experience in foreign currency trading while Binary Options is quite simple and easily understandable even to novices in financial trading. This simplicity makes Binary Options more appealing but do not think you don’t need to learn anything. Education is a big part of success in trading and this applies to binaries as well.


  • Binary option trading has a higher level of profitability compared to Forex trading. The profitability rates of Binary Option trading often range between 60% and 85%. In Forex trading, the returns are uncertain and can only be determined after the closing of a position.

  • Binary Option trading is safer compared to Forex trading. With Binary Options, some brokers offer up to a 15% refund in case of losses, which acts as a cushion for the Binary Option trader. Forex trading has no safety precautions in place (if you don’t use a Stop Loss order or other form of protection) and in cases of wrong investment decisions, the Forex trader may lose all money invested.

  • Forex can be traded continually throughout the weekdays while with Binary Option trading, weekdays are at predetermined intervals. The trading of Binary Options is dependent on the commodity exchange hours and the local financial markets.

  • Binary Options offer a lot more assets. Forex stands for Foreign Exchange so obviously only currencies can be traded, but when it comes to Binary Options, the choices are wider and include stocks, indices and commodities on top of currencies. More choices, more opportunities

  • The Forex industry has a lot more regulation compared to Binary Options. However, in the last couple of years the top Binary Options brokers started to pursue regulation and this is a major step forward for clients’ safety.

  • Forex is leveraged and this can be both good or bad, depending on how you look at it: you have the potential to make more but also you risk more. Binary Options are much simpler in this regard because they are not leveraged product.

  • Although they are differentiated by the aforementioned features, Forex market and option trading have some similarities. Both are easily accessible to the public since they can be operated online. What is required of potential traders is simply a network connection and start up capital that can be as little as one hundred dollars.


Binary Options VS Forex – Bottom Line.

Overall, nearly anyone can join this revolutionary way of trading. However, some binary options brokers are not regulated, which can potentially lead to some traders being taken in by scam artists. Beware, do your research and pick the right trusted binary options broker for you.