At the beginning of a career, most traders ask a question: what to choose binary options or Forex? Forex market professionals do not consider it necessary to study in detail how signals work for binary option, and for newbie’s, they like the opportunity to make money quickly even on small deposits. Each option has both advantages and disadvantages.
Let's start with definitions. An option is a standard exchange contract entitling the owner to buy the asset at a fixed price before a certain date (expiration). Binary options are not traded on the stock exchange; the term “binary” means that only two outcomes are possible: positive (gain) or negative (loss). A few years ago, such activity was called financial betting, now the term is not used due to licensing problems. Option in the picture:
A buy transaction (BUY) is similar to the opening of a binary option upgrade (CALL), the opposite in a declining market will be a PUT option. These are two classic options for how to make on binary options; binary brokers may have additional offers such as “Stay inside / Out of range” and “Touch / No touch of the price level”.
Let's not give a detailed look at the advantages of each way of trading, but simply provide a comparison table:
The main attention will be paid to the question, what are the differences between Forex and binary options, especially since, regardless of experience, traders make typical mistakes:1. There are short-term options
The transaction lasts from 60 seconds to several minutes and getting a 70-90% profit is a very attractive opportunity. But in reality, it is extremely difficult to make money - price movements in such small time intervals are practically impossible to predict. It can be either a sharp jump or a slow movement by several points. In fact, the trader is trying to guess the chaotic market fluctuations as in scalping, so short-term transactions are difficult for beginners.2. Using a linear chart
A line chart is often set on brokers' online platforms, often by default. But they are good only for advertising, we can see the price movement, but they are unsuitable for trade. However, traders who have previously traded in the currency or stock markets often stop using candlestick charts, and trading again turns into a "guess the trend." Therefore, do not forget candlesticks and MetaTrader terminal, and on the broker's website, we only open deals.3. No trading strategy testing
Newbie’s analyzing how binary options signals work; unfortunately, perceive advertising "all very simple" too literally. The usual situation - after several years of Forex trading and technical analysis begins a stupid click "CALL/PUT" and a quick loss of deposit.
After working on such a "strategy" it is concluded that as an additional income binary options can be used, but in the long run it is just a casino. But let me, because Forex is also not as simple as the authors convince clients of various "super strategies" and it is normally perceived? If you take options seriously as well, the profit is guaranteed.4. Simple transfer of a working strategy
The standard error is the opposite of the previous one, which is not taken into account when switching from Forex - "stretching" the strategy that showed good results on options. Why signals for binary option are false? The answer is simple - does not take into account the expiration time (the action of the option).5. Limited time of the transaction
The main condition for a positive result is to correctly calculate the time during which the option is open (expiration). Understanding this does not immediately come. Forex allows you to keep a position open as long as you want, close it at any time, use the Take Profit/Stop Loss levels and set a pending order. On option, all this is not.
Even if the market analysis is done correctly, right money management works, but expiration is determined incorrectly there will be some losses. In stock and foreign exchange market, price levels and only then time are important, this is the main difference from binary options, although in the range price is also important. So switch your thinking from price to time as quickly as possible.6. No money management
Risk management should be in any strategy, but this rule is constantly violated by traders. Money management in how to make on binary options strategy plays an even bigger role than in Forex because it is impossible to close a position early or in very bad conditions.
This is mainly due to the excitement, which as it turned out; options can come faster than Forex. Advertising stories about quick earnings immediately after opening a Deposit, the ability to quickly compensate for losses, and the online platforms themselves are more like slot machines give sad consequences even to experienced traders. In Forex everything is going better, you can carefully plan the deal even if it is scalping to put the levels of profit and loss.
To summarize, another important fact to consider when choosing why signals for binary options and not the Forex market - there is no leverage. Having got used to it, the trader begins to involuntarily strive for the same volumes of tens of lots and the transition from thousands of dollars to hundreds takes a certain time. Therefore, when starting to work, always remember that this is a completely different market and reasonably calculate the volume of the transaction.