If you are new to the world of trading, you may be wondering just how these two types of trading differ from one another. It can often seem as though there a number of similarities that may make them appear interchangeable.
After all they both operate over online platforms and involve speculation of prices. Nonetheless, if you are asking “what is the difference between binary options trading and forex trading”, there is a lot to discuss. The information below will show you how these two forms of trading vary:
How the Actual Processes Differ
With binary options trading, you are expected to determine whether the cost of an asset will increase or decrease within a specific period of time. This form of trading tends to be an all-or-nothing type of trading.
If you make the right assumption regarding the value, you make a profit with the trade. If you make a wrong prediction, you lose your investment. Binary options trading can involve stocks, bonds, currencies, or commodities.
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Forex trading, on the other hand, is about determining how one currency will perform against another. For instance, if you feel as though the Pound will increase in cost but the dollar will fall, you will buy this currency pair. You then simply have to wait for a price pairing that allows you to make a profit before selling.
Variances in the Final Profit
When you place a trade, the anticipation is that you will make a profit. Just as important, however, is how much of a profit you can make with the trade. Now, with binary options trading, you are allowed this opportunity. When placing the trade, you are aware just how you can stand to gain.
This is because in most cases, traders are offered a return of around 80 percent of their investment. This means that not only will you be getting the original amount back, you can receive an additional 80 percent of that investment.
There is no such guarantee with Forex trading, nonetheless. This is because when you buy a currency pairing, you are simply making the assumption that a currency will increase in value. There is no way to know just how much this increase will be, let alone if there will be an elevation at all. You are able to sell the currency once it has reached a price that you are happy with.
The Length of the Trades
With binary options trading, you are working within a set period of time. The majority of the trades do not last for a long time, and most have an expiry time that ranges from about one minute to about five minutes.
Depending on the broker that you are working with, you could have shorter or longer periods. At the end of the trade, you will be able to determine if you made the right prediction or not.
Forex trading is conducted at your discretion, however. This means that you can choose when you want to close the trade. You could opt to do this in a matter of hours or even wait for months on end. The reasoning behind the length of the trades is waiting until the price is most opportune for you.
These are the short answers if you were ruminating about what the difference between binary options trading and forex trading is.