Binary options offer some distinct advantages over forex trading which are worth exploring for anyone considering switching or starting out as a trader. Some may point out that forex has been around longer, resulting in highly established trading platforms, internet information resources as well as a wealth of published books. However, those who trade binary options will counter this by pointing out the benefits of a new form of digital trading and its potential to be a leader in financial market speculation for retail traders.
There is nothing new about trading options
Despite appearing to have only just emerged as a trading format, binary options and its older counterpart, regular options, have been around for as long as forex has been available to trade. The problem was that regular options were provided by specific brokers who usually had a client base of those with a large amount of investment capital or who had a vague idea about what they were doing. The arrival of the internet, however, began to popularise “easy access” trading formats, where a large amount of capital was not necessary, especially in those industries seen to reflect the yuppie image of the pre-internet age. Forex, and the ability to trade on huge levels of margin, was instantly attractive for those who wanted to make their 2,000 USD account worth 20,000 in the markets.
How binary options compare to the image of forex trading
Regular options did not, however, catch the eye of home-based and semi-professional traders in the same way as forex because they were deemed both expensive and a specialist niche. Binary options, however, has removed this image entirely. Binary options are available to trade for as little as 50USD, which can be used to open an account, and trades can be less than 10 USD. They have also shed any specialist or complex image by becoming one of the simplest forms of trading available.
Benefit 1: zero spreads
The instant benefits of trading binary options over forex are the fact that there are instantly no spread payable to brokers. Unlike forex, binary options brokers do not provide a spread buy or sell price for each position and only offer one market price. The only time, in fact, that binary options platforms include more than one price level within a quote is for range or touch trades which rely on price staying within, or touching, a specific price level.
Benefit 2: Equally as flexible as forex
Increased flexibility of binary options means that they are also just as competitive as forex in terms of the speed at which they can be traded. Similar to a forex trade they can be held for a longer period of time, allowing for swing or position traders to take advantage, but they can also be set to expire in as little as sixty seconds. Sixty second trading has become one of binary options most popular features and along with the existence of zero spread payments it is a great alternative for forex intra-day traders.
Benefit 3: Out of ours trading and no stop losses
Out-of-hours trading is also growing in popularity among binary options traders due to the existence of zero punishing spreads. Overnight markets are often considered a difficult time for forex traders with any opportunities outweighed by the wide spreads and effectively reducing the 24 hour capabilities of may forex markets. Additionally, forex traders have always been required to think about applying a stop loss to each position that they open. Whilst this may be good risk management, binary options traders are not required to take stop losses in to consideration. Along with spreads, this is another factor which binary options traders simply don’t have to consider and an additional risk factor removed from their trading.