One major difference between binary options trading and forex trading lies on the level of risk involved. In binary options trading, you either win or lose.
2. How binary options work?
This means that if your prediction is right, then you are going to get your money back plus the profit. On the flip side if you lose your trade, then you are going to get nothing meaning that you are going to lose even your initial investment. Forex, on the other hand, is a bit different. The risk involved is more variable. A stop loss can be used to control the level of risk involved. This can work for or against the trader.
What Are Binary Options?
It all depends on the move that the trader makes. In binary options trading, you will always get to know the amount you are going to gain or lose upon trade expiration. In fact, some binary options traders allow their traders to cut their loss by folding their trades before expiration.
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However, that is not the case with forex trading. Unlike binary option where you can easily know the amount that you are going to get when you place your trades, it is very difficult to know that amount that you are going to earn in forex trading. There are many factors that make it very hard to predict the amount that you will lose in forex trading. Some of these factors include a lack of liquidity to implement a stop order at the preferred price and slippage.
The brokers trading platform can also go down thus preventing you from executing the stop order. In binary options trading, the amount of profits that you are set to get when placing your trade will not change regardless of how the market is performing. In other words, binary options have price certainty.
On the other hand, forex trading is heavily affected by market volatility. This means that if the market is not in your favor, then your profit margin will also reduce. As such, forex trader not only has to worry about which direction the market will move but will also have to worry if the market will go for or against them. With binary options, the magnitude of price movement does not really matter.
Binary options trading exposes you to a known risk. With binary options, you have no option but to trade within the time frame that has been provided to you. On the other hand, forex trading allows you to trade at any time and for as long as you want. This means that you can choose trades that last for 10 minutes or ones that last for many months. Forex trading gives you the freedom to close or open trades as you wish.
In binary options, there are no hidden or additional costs. All costs that you will incur are factored in before you place your trades. Forex trading, on the other hand, has many costs that come in the form of commission, spreads and in some instance both. Binary options allow traders to invest in many assets such as stocks, commodities , stock indices among many others.
Just as its name suggests, forex trading limits you to just currency trading. Binary options trading involves a very small margin of error. Expiration time, asset and investment are the key contract clauses. A deal between a trader and a broker can be illustrated by the following example.
A user selected 3 minutes and had invested 10 USD. Analyzing news and trends a user predicted that in the upcoming minutes the index would increase and had made a deal. The index increased to 1. Thus, no matter how much the index increases, the profit is fixed and depends on the result only. In the index was 1. Referring to binary options trading, a broker frequently plays the crucial role, either positive or negative.
IQ Option broker is considered among the most reliable ones being awarded for its customer-friendliness and progressive technologies.
Binary option - Wikipedia
The whole process takes some 5 minutes. If you wish to invest funds in binary options IQ Option platform offers the best conditions for users. When the expiration time comes and your prediction corresponds to the market situation, funds are charged to your account in several seconds. Binary options belong to the category of financial assets therefore their analysis is connected with special instruments applying. Those are divided into three categories. Economic calendar includes all news that concern chosen assets. Every news may affect the price significantly. Indicators like Bollinger lines, Stochastic, MACD are necessary to analyze the trends and understand further price movement.
There exist tens of different strategies for binary trading. Among the most widespread strategies the following ones can be pointed out: Ishimoku Cloud, Profitable hedge, Slaughter, Ninja, Puria, Trend Channel, etc. Strategies are worked out for particular expiration time. There exist turbo ones for minutes or ordinary oriented on longer time. In fact, every strategy should be tested on different assets and personal experience only may tell which strategies are the best ones. Our platform offers perfect conditions for strategies testing. Every user obtains a demo account after registration.
The main advantage of a demo account lies in getting virtual money. When those funds are spent, an account can be refilled again. Refilling is unlimited. No real money is necessary for an account refilling.
Binary Options Brokers in Germany
Thus, traders are free to pick up different assets and test different strategies in order to find the most effective ones. In fact, those assets cannot be compared because they imply different trading principles, different strategies and different profits as well.
Shares are understood as more professional instrument.
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Their price mostly depends on fundamental factors including news therefore traders are recommended selecting maximal expiration time periods. Referring to currencies, the influential factors are more numerous and the situation changes every second. Our platform offers more than 40 different currency pairs for trading but users cannot pick up all assets because each type demands profound analysis therefore professionals recommend selecting one or two assets and use them for trading.
The more you understand the situation, the more profits you obtain. Traders are recommended to trade pairs with medium volatility. The more popular assets are among traders the more complicated their prices movements are predicted. Different currency pairs depend on some assets or other factors and such peculiarity must be taken into account by traders. Thus, traders are expected to take all those factors into account and then pick up a currency pair understood as the most preferable one. The total portfolio contains information about all you deals.
Such option is recommended being used for correlated currency pairs. Binary options are understood as an instrument that demands the highest level of professionalism. Our platform offers extended functionality for those who downloaded apps for their PCs, laptops or smartphones. Video tutorials are suggested for free.
Moreover, you may participate in IQ option tournaments that welcome traders from all over the world and imply attractive prize pools. Some tournaments are offered for free while others demand fee that is just several dollars. Our platform offers some information for users including the recent news concerning a trading pair, technical analysis, predictions, etc. Based on those data analyzing the price movements becomes much simpler.
Using apps, traders may follow to 9 charts simultaneously where different periods of time can be selected. Most assets are closed on weekends because financial organizations work from Monday till Friday all over the world but some assets are still available for trading. Those are Over-The-Counter pairs suggested by a broker. Price movement is controlled by a broker as well therefore assets are understood as the most risky.
On the other hand, profits are maximal for OTC pairs.