There is an ongoing discussion among foreign currency traders on what type of trading gives more profit and is generally much better – trading Forex or binary options. Trading with binary options is an alternative way to trade with foreign currency. This is very different from what Forex brokers such as iForex, Xtrade, FXCM and Plus500 offer.
Differences between Forex trading and FXCM Binary Options
There are certainly differences between these two types of trading, and there are also advantages and disadvantages. When trading with Forex, each broker such as FXCM binary options will always use leverage. Novice traders who cannot manage the margin well may stand to lose money. However, this is easy to avoid and understand. When it comes to FXCM binary options on the other hand, leverage or margin does not exist. Binary options traders do not concern themselves with margin or leverage.
When it comes to trade duration for forex trading, traders always have full control on when they can exit the trade as they see fit. This decision, which rests on the trader, is fully dependent on chart information or news events.
With FXCM binary options on the other hand, expiry time of the trade is selected before entering an actual trade. Duration can be anytime from 1 minute to 1 hour. This is entirely up to the trader. The trader is then at the mercy of the expiry time. However there are some FXCM binary options brokers that will let the investor exit the trade either earlier or later than the agreed-upon time, but the monetary return will be lower. Not all binary options brokers offer this option.
Forex trading Brokers and what they offer
FXCM is able to trade 39 pairs of currency for its clients. In a particular pairing, the initial currency is called the base currency, while the latter currency is called the counter currency. When traders are interested in trading a particular currency pair, all they have to do is to add a check mark next to it.
Account holders of iForex can also trade currency pairs. Since the currency market is approximately 10 times bigger than any know stock market, there are endless opportunities for individual traders to profit. In binary options trading for foreign currency, traders also have various ways of making profit.
Despite what binary options traders are saying about online forex brokers getting commissions, the fact is many brokers like Xtrade for example, lets their account holders trade forex with no commissions. How do they make money? These forex brokers have fixed spreads in the middle of buy and sell prices. For example, the range for the US Dollar and Euro pairing is from 2-5 pips.
Dubbed as having one of the best forex trading platforms, Plus500 says that there is plenty of room to trade in the forex market since this decentralized market has an average daily turnover of $5.8 billion. The payout scheme of binary options trading is created in such a way that it allows traders to attain a reasonable proportion between risk and reward. In forex trading, traders know exactly what they stand to win or lose before starting the trade. This means that in forex trading, the investor is solely responsible for the potential profit and loss.
These are just some of the differences between forex trading and binary options trading. Weighing the pros and cons of each, traders should choose their preferences well and decide which works best for them.