Many people trade Forex assets through brokers such as Meta Trader 4, and then move toward binary options trading. What is the reason for this change and what are the real advantages of trading Forex with binary options?
Classic Forex trading corresponds more to the profile of a particular investor who not only has the means to invest large sums, but also assume the risks in case of loss. Trading Forex in its purest form through brokers such as Meta Trader 4 does not correspond to the financial possibilities that are at times more limited of a person wanting to begin financial trading. Many try and unfortunately fail due to lack of experience. To be honest, the few people who succeed in classic Forex trading are professional or semi-pro investors whose capacities to invest are much more significant than those of a person who is starting out with their sights on getting richer.
Leverage is what has made Forex trading so popular. You deposit and trade with 100 times the amount deposited. This is like a huge bonus allowing you to achieve gains that are proportionate to the sum deposited + the bonus offered. In theory, there is nothing more perfect. You deposit 100, you trade with 10,000, and your profits are calculated based on your 10,000 balance. Therefore, where is the trap?
It’s very simple. The same way that your profits are proportional to the sum invested + leverage bonus, losses are as well. This is the main reason why many have tried to trade Forex and have quickly understood that this wasn’t for them. Take a very simple example: you have a 10,000 Euros balance from a 100 Euro deposit. In the case where you purchase too high and the rate drops dramatically, each point drop is a real catastrophe, because losses are based on the 10,000 Euro sum. This means that in the span of 2 seconds, you can lose your deposit and your account is automatically closed, because your initial deposit if the first to go, and you cannot continue trading if your deposit is already lost.
First advantage of trading Forex with binary options: no leverage – risk controlled
With binary options, there is no leverage, which means that the sum invested in one transaction cannot endanger your initial investment in any way. You cannot get into negative territory on your binary option balance, and you begin to reduce the amount of your deposit. For example, you have deposited 200 Euros, and you open a binary option contract at 10 Euros. The choice is simple: either you lose your 10 Eurose or you earn a profit of 85%. Your risk is limited and known before the transaction is opened, which is not the case in classic Forex.
Spread fee or commissions:
The spread fee is defined in PIP. What is PIP? PIP corresponds to the price interest point, which is the fourth number after the period. Let’s say you are working with a broker who takes 5 pip in commussion. What does this mean? Simple, this means that if you have purchased EUR/USD at 1.3450, you cannot achive a profit as long as you are not at 1.3456, because the broker takes 5 pip for himself. In theory, if this commission did not exist, you would already be a beneficiary. But in classic Forex, this commission is inevitable, and this is the second reason why most often, people who lack experience lose.
Second advantage of trading Forex with binary options: no commission
With binary options, you have no commission or spread fee. All you need is one single pip to achieve a profit. Imagine that you have opened a EUR/USD binary option contract at the price of 1.3450. If you trade upward, all you need is for your binary option asset to be at 1.3451 to achieve an 85% profit.
This means simply again that your risk is reduced with binary options.
What to choose between classic Forex and Forex with binary options when large sums can be invested?
The answer is the same for everyone, whether you have large financial resources or not. It is clear that if the risk is considerably diminished as it is the case when trading Forex with binary options, you should choose binary options. The calculation is simple: for a transaction opened at 1000 Euros, on Option Fair for example, you can achieve 850 Euros in profit. You also have the possibility of using Option Close to cash in on your profits immediately or to reduce the amount of your losses.
To conclude, why choose Forex with binary options?
Because with classic Forex, there is only one means of achieving a profit – buying at a lower price than you are selling. While with binary options, you can achieve a profit whether the market is rising or falling. All you need to do it make the right prediction. This means very simply that trading binary options allows you the possibility of making a profit on all financial opportunities, whether they are good or bad. If the price of oil is rising, trade upward; if the Yen is falling, trade downward.
To clarify, what does Forex with binary options consist of?
- A controlled risk that is known in advance (no leverage)
- No commission or spread fee (one pip is enough to profit)
- Achieving a profit on assets that are rising or falling
- Suitable for all types of investors
- Possibility of trading in the very short or medium term
- Minimal risk thanks to Option Close and Extend.
- The highest yields in the market
Possibility of trading different types of assets with one single account