If you’re interested in investing in Forex and binary options, the large financial currency market, you’re probably wondering which is the best for you to choose.
Below we’ll try to give you a detailed overview of the pros and cons of each one, so you can make a simpler, correct and accurate decision.
How to Invest in Forex and Binary Options DIFFERENCES
Binary options are contracts that have a fixed risk and reward ratio; it’s a market in which the investor is required to predict the direction of an underlying asset within a stipulated period. Binary options are available as commodities, indices, stocks and currency pairs. If the prediction is correct, investors are informed in advance of their reward.
For the Forex currency market, traders are forced to predict not only the direction, but also how high or low the asset will be. Consequently, there’s uncertainty regarding the return and a greater risk.
You should also bear in mind that the forex market doesn’t have a limit on the amount of money an investor can make or lose, unless they are using tools that limit the amount of loss that can be had in a transaction.
This means that the trade will stop automatically if the limit loss occurs. Likewise, the investor can decide how much money he wants to make by setting the value at which he wants to stop trading. For binary options, the maximum amount of investment could be its total amount, while for Forex, the risk can be reduced by using certain programs.
It’s important to note that binary options are actually a new form of investment, while Forex has existed since several currencies came up. Consequently, the Forex currency market is much larger in turnover when compared to the binary options market. Forex is even the largest financial market in the world, working five days a week, 24 hours a day.
Not only that, on average 5 trillion dollars are traded every day, which means that when you invest in Forex and Binary options, you’re basically competing against other professional investors who have a lot of experience. The binary options market is much smaller when compared to Forex, and has a considerably small number of professional investors involved.
To this we must add that investors have many more commercial assets to choose from in comparison with the investors that trade in Forex. Just a few investors know how to use programs like Binary Option Robot, while for Forex investors, highly sophisticated trading software is practically a necessity.
Main reasons to invest in Binary Options
To begin with, with binary options, you have a much wider selection of different commercial assets. In Forex, on the other hand, you only trade with currencies, but in binary options you can market currencies, commodities, stocks, indices and basically anything with a variable value. Therefore, this is only limited by what the investor is willing to select. Unless you only want to exchange currencies, this is a great factor and the main reason to opt for binary options.
Another important thing to note is that in the binary options market, competition isn’t as fierce as it is in Forex. You should bear in mind that the foreign exchange market is huge, so there are many specialized investors with a lot of experience and above all, who are successful in business. In Forex you’ll be competing directly against this type of investors.
The opposite happens in the binary options market where competition is still low. One of the main reasons to opt for various options is that with really large sums, direct investment in equities is cheaper. This offers an excellent opportunity to investors who are investing with small amounts, since tougher competitors are scarce.
On the other hand, a binary options investor gets access to much larger bonds. That is, in the currency market, competition is relatively stable due to its long history. The binary options market is in constant development, which is why new Brokers appear every day trying to attract clients with large and irresistible bonuses and benefits.
In addition to the above, there are no transaction costs in the binary options market; that is, investors pay nothing for the transaction. Expenses are even directly linked to the payment percentage. On the contrary, the costs for foreign exchange transactions can be considerably high, while the minimum costs only allow for small investments, which aren’t really profitable.
Main reasons to invest in Forex
Here we need to note that Forex is a better fit for experienced investors who really know what they’re doing. If you want to invest in currencies based only on your intuition, you will undoubtedly lose your money. People who trade Forex currencies, have extensive experience in the forex market, an experience that comes from years of study and practice.
Also bear in mind that you’ll need skills that can be directly applied to a profitable practice. That is, only theoretical knowledge without application won’t really take you far. Another aspect to consider is that most binary options investors can only invest up to $ 5,000 at the same time.
In Forex, investments worth tens of millions of dollars can be established at a time, which means that with such a large amount, transaction costs will also be proportionally lower than if you’d invested in binary options. Now, if you’re absolutely convinced that you want to invest exclusively in Forex, forex trading is probably your best choice.
In any case, my general recommendation is staring with the binary options by investing small amounts of money and getting the necessary experience and knowledge before venturing fully into currency investing.
Best sites to invest in Forex and Binary Options
- Multinational with more than 20 years of experience
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- Regulated by the Securities and Exchange Commission of Cyprus
- Minimum investment $250
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