When it comes to trading binary options, there are a number of advantages that you will find here that using a Forex broker just cannot provide. Let’s break these advantages down so you can gain a better idea of which type of trading is best for you.
The Spread in Forex
The first thing to go is the spread. If you’re a seasoned Forex trader, you know all about the spread, and probably have a great idea of how to overcome it on a consistent basis. Even better than knowing how to overcome it is not having to overcome it at all, though. If you don’t know, the spread is the gap in price between the bid and the ask prices. It prevents you from buying and selling a currency pair immediately at a profit. It’s also how Forex brokers make their money. If you buy the EUR/USD at 1.1050, you cannot sell it when it goes up to 1.1052 because you will still lose money. Brokers quote different prices for buying and selling in order to ensure that they make more of a profit. This is usually around 5 to 8 pips in difference, depending on the broker, and that’s just enough to make trading in the Forex market a lot harder than many originally expect it to be.
Binary options brokers have one price and you are given your full profits regardless of how much the price moves, as long as it moves in the right direction. If you take out a call option on the EUR/USD at 1.1050, and it goes up to 1.1051 at the expiration time, you will see your full profit rate credited to your account, and not a loss like you would see with a Forex broker.
With Forex trading, there can be a large element of the unknown. You might find that your trades are up 10 percent, giving you a big profit when you add in your leverage, but there’s potential for it to go even higher. That’s great, but realize that the exact opposite could happen, too. Instead of closing the deal here and taking your cash, you could find that the position goes against you because you waited too long and now you’ve lost money, simply because you got greedy. This happens a lot, especially if you are not a firm user of stops.
In the world of binary options, this never happens. You have a set rate of return and a set timeframe. In other words, how much you make (or lose), and when you will make it or lose it, is far easier to predict.
Diversity in the Market
If you’re a Forex focused trader, you probably have never tried to trade other types of assets. But with a binary broker, you now have that choice, if you wish. Binary options brokers offer currency pairs, and this is where they see most of their trades conducted. There’s a reason why binary options have become so popular with Forex and former Forex traders. But they do also offer trading on stocks, indices, and commodities. There is a lot of potential for extra money to be made if you have knowledge of these assets, or are willing to learn how to effectively trade these assets.
You might decide to never branch out, and that’s fine. There’s a good argument to be made for specialization. But, it’s nice to know that it’s easy to do if you wish to, especially when it comes to related assets, like the U.S. dollar and the major indices in the U.S. In other words, it can be a profitable move, but only if you are comfortable trading outside the Forex market.