It is not uncommon to see binary options trading and Forex trading being linked, as both are considered to be alternate forms of trading outside of traditional market trading. However, this is really where the similarities end, as each of these two forms of trading present several different elements that are in no way similar.
A key difference between the two is the amount of funds required to begin trading. The cost of opening a Forex trading account averages around $500, but can be much higher. Binary options broker accounts can be created for free, with the minimum deposit amount being as low as $100. The most than one might expect to need to deposit to being trading binary options is $250. The difference in start up costs must be noted, as most prefer having the ability to get started trading with a smaller amount of funds.
Another key difference would be the potential loss amounts. In Forex trading, loss amounts can be infinite and therefore a stop loss is needed in most situations. The maximum possible loss in binary options trading will always be the investment amount of each trade. Nothing more, nothing less. This allows for a high level of money management control, as the trader is free to never risk more than he or she can comfortably afford to lose. Unlike Forex trading, no stop loss will ever be necessary.
The expiry times of trades will also differ. Binary options trading, depending on the broker, will offer expiry times as short as sixty seconds. This presents the possibility of accumulating profits quickly. Forex trading will offer reasonably short expiry times as well, though none as short as one minute. Both forms of trading also offer lengthier expiry times. However, Forex trading will require careful monitoring over these longer periods in order to halt loss accumulation. Live trade monitoring takes place in binary options trading as well, but with the potential loss amount fixed, it is not an absolute must.
There is no need to choose between one or the other, as both binary options trading and Forex trading can be done simultaneously. In fact, many choose to use both financial instruments, applying the same research and analysis within each platform. The knowledge gained in either form of trading can be applied to the other, potentially helping to increase profits. Though there are stark differences between the two, any knowledge of currency trading will be beneficial.
Written by John Anthony at http://www.MasterBinaryOptionsTrading.com