Binary Options Trading

Why Binary Options are a great way to trade Forex

Many people who once traded spot Forex are moving into the world of binary options, and there are a number of reasons for this shift. Binary options offer many of the same benefits as Forex trading, in terms of fast-pace, around-the-clock availability, and the potential for large gains. Binary options have many features which make them more attractive, however, including the limiting of risk and fixed contract lengths.

Perhaps the biggest draw for binary options is the fact that risk is almost entirely managed. In a binary option transaction the trader knows from the outset how long their contract will last, and exactly how much their profit will be in the event of an in-the-money expiry, and exactly how much their loss will be in the event of an out-of-the-money expiry. All of this is taken care of by the instrument itself, without the need for complicated stop-loss protocols. This allows the binary option trader to build a strategy around well-understood profit and loss margins, giving them an advantage over traditional Forex traders.

Contract lengths in binary options are also entirely fixed, which many people find to be a relief after trading Forex. Most binary option contracts have a duration of less than an hour, so that there is virtually no period when a trader is bought into a contract but not able to be actively involved. Many Forex traders who dislike thinking about their Forex contracts while they sleep, wondering whether they’ve hit stops while away from their terminal, find binary options to be a welcome change. Some people are also concerned about broker manipulation, especially in the spot Forex market. Because binary options use publically available data to determine strike prices and expiry prices, there is much less possibility of manipulation.

Most people who move from traditional Forex trading to binary options continue to trade with Forex currency pairs. The general principle remains the same – determining the direction a currency pair is going to shift. Rather than hoping for an enormous shift, however, and figuring out how much leverage is needed to make a reasonable profit, with a binary option all the trader needs to determine is directionality. If the currency pairs finishes the contract in the correct direction – even if it has only changed by a fraction of a point – the payout is the same as if it had shifted enormously, and is generally around a high 170% return. This removes a great deal of the work of Forex trading, where large shifts have to be hunted out to eke out a good profit.

Binary options trading has the added benefit of having a much broader selection of asset classes to choose from. Should a trader wish to trade not only Forex currency pairs, but also commodities and stocks, they can do so without having to understand an entirely new system. The same simple system that is used for Forex binary options is also used for commodity binary options and stock binary options, and many traders purchase contracts across different asset classes at the same time.