Saturday, 19 October 2019

Differences in Binary Options and Forex

Although binary options (BO) are now gaining popularity in the market, following the long-standing forex trading spot, many parties still do not understand the difference between trading binary options and forex. Both are traded online, using the same instruments, so where are the differences?

Before discussing which aspects are different binary options and forex, keep in mind that binary options do not really trade currencies, unlike forex trading. There is no profit or loss that fluctuates according to the ups and downs of the currency. In binary options, both the level of profit, loss, and the time of the close position, have been determined before opening a position. Then, what is traded in binary options? Here, you only estimate the direction of the price movement of a pair within a certain period. Take the example of the following sentence: "Open the" call "option if you expect EUR / USD to rise within 1 hour". This information often appears on binary options trading platforms. From there it is clear that the focus lies in the direction of the movement of EUR / USD, whether it will go up or down.


Where and when prices will move is a major aspect. There are no additional calculations such as trading lots, order types, let alone stop loss levels like in Forex. The above example is just a general description of the differences in binary options and forex. The following points will provide a more detailed explanation of the different ways of trading: Trading Size In binary options, the size of the trade is determined by the value of capital (in Dollars).

Of all trading account balances, you can take 5%, 10%, or even 20% to be used as capital. But remember, this amount of capital also determines the amount of risk per position. Once the option is closed loss, then all the capital you place will be sold out. Example: You deposit as much as $ 100, and take 10% of that amount as capital per option. So, the amount of capital as well as the risk of loss per position is as much as $ 10. In Forex, trading size is determined by the lot value. These lots vary, ranging from standard lots, mini, micro, to nano. One standard lot is worth $ 100,000, while 1 mini lot is equal to $ 10,000.

The smaller the lot unit, the smaller the size of your trade. It is impossible to know with certainty how much loss or profit will be obtained, because the level of interest or loss fluctuates according to price movements. The risk calculation here is not final, but only risk per pip. If the entry is a standard lot, then your trading risk is not absolutely worth $ 100,000, but depends on how big the price movement. Order Types There is no buy or sell in BO, because you do not buy or sell assets that are traded. Orders in BO generally involve a call / put, or can also be called high / low. Suppose you take the "put" option, as long as the price drops lower than its original position in the allotted time, even though it's only 1 pips, you will end up in-the-money (profit). In addition to the high / low type, there are also other types of touch / no touch and in / out orders.

In forex trading, there are direct buy / sell orders, as well as pending orders, usually in the form of limits and stop orders. The essence of all types of orders above is actually the same, namely to buy or sell currency instruments based on predictions of fluctuations in the value of the currency. Thus, the greater the increase or decrease, the more influence also on the amount of your profit and loss. This inevitably requires forex traders to take special steps in order to maximize profits when prices are trending. Profit and Loss Large profits and losses that you will receive can be estimated with

certainty in Binary Options. This is made possible by the capital placement system as the investment amount for each option. For example, you open the "call" option with a capital of USD100. That means, if the option fails then you will lose all the capital. But what if the option works? The USD100 capital will be added to the profit amount according to the payout rate. Payout is the percentage of profit that you specify before opening an option. Therefore, for example, before placing the "call" option, choose an 80% payout, the refund amount is $ 180. The size of profit and loss in BO is fixed, no matter how far the price is moving.

On the other hand, the amount of profit or loss cannot be calculated with certainty in forex. As long as the order is still open, your trading earnings can continue to increase or decrease in accordance with the level of price movements. However, this can be overcome by placing a stop loss to limit losses, or take profit to lock in profits. Trading Fees Trading BO does not charge any trading fees. There are no spreads or commissions for each position you open. Calculation forThe losses have been calculated based on the amount of capital and rate of payout that you choose yourself. Meanwhile, forex brokers charge a spread or commission which is automatically charged to your trading position. The amount of this spread can vary depending on the broker and pair used. When there is increased volatility, spreads can also widen above normal.

 Close Position Binary Options only adopt one close position mode, which is expiry time. This feature can automatically close binary options in accordance with the size of the time that you set yourself. For example, if you open a EUR / USD "call" option with an expiry time of 1 hour, the option will only last for 1 hour. When the expiry runs out, the "call" option will close automatically.

This expiry can be very important, because when it is closed the price is not at a higher level than its original position, the option means out-of-the-money (failure or loss). The selection of this expiry time can be adjusted to your trading period. In forex, there are 3 kinds of close position options: manually, hit by stop loss / take profit, and hit by a margin call. The third option is the nightmare of every trader because it indicates the amount of equity has been completely wiped out by floating prices. Therefore, every trader will try to close a position in 2 other ways before being hit by a margin call. Unlike BO whose estimated expiry is determined before opening an option, close it manually when an order position is running. Stop loss or take profit can be planned before opening a position, but you can also change the level when the position is still running. Trading Platforms Almost all binary options trading platforms are provided in Webtrader format.

This means you don't need to download any application to be able to place options. Thus, the BO trading process can take place more easily, all you have to do is open a web broker and operate trading from there. However, the types of trading platforms in binary can be very diverse with a variety of different features. To find out more about the binary platform, you can first browse about the provider. Each platform provider has the concept of appearance and features of each, so that although used in different brokers, you will more easily recognize and adapt to the platform. MT4 is still the first choice in forex trading. This download platform is provided by almost all forex brokers, and in general there are many traders.

Not only MT4, forex brokers also now have many Webtrading platform models. In this case, forex trading may be superior to binary options. Technical indicators available on the forex trading platform are usually more diverse.

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