First we need to consider the costs. In comparison to Forex trading, binary options trading demands little with respect to start-up costs or investment funds while the potential profits remain excellent. Most regular Forex trading accounts require about $500 in start-up funds. In contrast, a binary options trading account can be funded with as little as $100. This really is very significant for the novice trader who initially will need to have free access to their trading funds in order to generate profits.
To illustrate, let’s assume that you think that EUR/USD pairing price was about to increase. As a Forex investor there will be many aspects to think about. For one thing, after creating an account and making a financial deposit, you’d have to place a purchase with your chosen broker. A stop loss would also be needed. This was made to prevent Forex traders from potentially losing too much money on any one trade. The stop loss amount can be chosen by the Forex trader and is basically a must since massive financial loss is a possibility.
Stop loss plays no role in binary options trading. The maximum loss amount in any binary options trade will always be the investment amount, which was decided upon by you. If you invest $100 because you feel that the EUR/USD will increase by the end of the trading period and you are wrong, $100 is the maximum loss amount. But if you are correct, you get the $100, plus the profit amount which was established prior to purchasing the contract. Consider also that in Forex trading commission must be paid to the broker. Binary options brokers collect no commissions or fees. Unless the trader loses on a trade, the binary options broker earns nothing.
The time-span of binary options trades when compared to Forex trades is also going to be different. Binary options trades can last anywhere from one minute up to a month. Forex trades are often offered in hourly up to weekly form. This once again is viewed as a benefit for the binary options trader since super-fast profits can be generated on winning trades. Also, the outcome of the binary options trade is going to be determined by the asset price at the end of the trading time. Period. So even though you may want to monitor live trade progress, it will not be entirely necessary.
Both forms of trading carry advantages, so what some traders choose to do is use both forms of trading. Since research and analysis are required in both binary options trading and Forex trading, any knowledge may be applied in more than one trade situation. Currency pairs are included in the asset index of all major binary options brokers, so the potential for multiple profit opportunities is definitely in place. Take this into consideration if you’ve been trading Forex, yet are interested in seeing what binary options trading can provide.
Many traders nowadays employ forex signals and binary options signals. The advantage of these services is that they save time analysing charts and learning in depth techniques. Instead they allow the trader to leverage the skills of professional traders.
Your luxury is that you wouldn’t have to yell and claw your way into crowds. While earning money, you will be seated comfortably in front of the computer. However, the fact still stands that you are still just like the hundreds of thousands who aspire to make it big as forex currency trader. What will set you apart from them is your attitude.
It is true that many have earned millions in a span of a few minutes. What those garnished tales don’t tell you however is that many have also lost millions in the same span of time. Here are tips that will help you so that your fate will be like those of the former and not those of the latter.
Forex Currency Trading Tip #1
Be a cautious risk taker. The forex market involves transactions ranging from one hundred dollars to billions of dollars. It is therefore not strange to find that joining the forex market even as a currency trader involves many complex rules. Many factors have to be taken into account in making wise risks. While it is true that there are no right or wrong decisions, we have learned from experience that the best decision must come from an analysis of the different factors involved.
Forex Currency Trading Tip #2
Take as many factors into account. One of the most important factors that have to be taken into account is the trend of the exchange rate of the currency you are buying or selling. See how the currency has been faring for the last 5 months. If the currency is gaining value then it may be wise to buy. However, if the currency is unstable and fluctuates continuously, then it may not be wise to buy just yet.
Other factors that will help in making decisions are the political climate, economic condition and global relations of the country of the currency involved. When the political climate of a country is unstable, most likely, the currency will lose value. For example, the currencies of developing countries on the verge of elections lose value because the government at that time is unstable. On the one hand, countries with strong diplomatic ties are likely to have stable currencies as it has potential for many investments which will make the value of its currency go higher.
Forex Currency Trading Tip #3
Big investments do not always mean big profits. Remember that each decision is as unsure as any other. If you buy one currency for a specified period of time, and you have limited money, a big investment will preclude you from buying another currency with potential within that period. Also, even after taking into account as many factors as possible, there is always that possibility of losing instead of gaining.
Forex Currency Trading Tip #4
The fundamental principle of buying low and selling high is highly insufficient. As you go along, you will learn other tricks and trades. Broaden your education as a forex currency trader by continuously reading the news. Even while in the comfort of your home, you should be able to know what is going on in the outside world to make wise risks.
Over the years, with the growing number of participants, currency trading has become increasingly competitive. The fluctuating currencies caused by changing political climates, economic policies and shifts in the global outlook have made foreign exchange even more complicated.With all the factors that have to be taken into account, the task of making a decision or taking a risk has become daunting. It is a good thing that forex currency traders have the luxury of choosing their allies. Over the years, as the number of forex currency traders have grown, many forex systems and software programs have been created. These system or software programs have been proven to be useful especially to neophytes.
There are different kinds of programs that can be used. Some may be downloaded over the internet; some are purchased over the counter or over the internet or some come with subscription packages for joining certain foreign exchange portals. Here is an overview of the different kinds of programs available in the market to help you in choosing which will be helpful to you as a forex currency trader.
Universal Currency Converter
A Universal Currency Converter is probably the most important tool that any forex currency trader would need. Most financial portals which facilitate currency trading offer currency converters in their subscription packages because this is a must. In choosing a portal or website to subscribe to, it would be best to check the number of currencies the currency converter can convert. It is also important to check the timeliness of the currency converter. Most online currency converters are up-to-date as they offer live, up-to-the-minute currency rates.
Another tool that is necessary for serious currency traders would be Forex Charts. Charts are necessary for spotting trends. Through charts, you will see the value of a currency rate relative to its past values and you will be able to reliably predict whether its value will strengthen or weaken.
Again, most web-based financial portals offer software that allows a currency trader to chart the value of currencies. The newest programs web-based Forex charts no longer need manual updating as it automatically charts the changes in currency rates.
As with currency converters, timeliness is the key. So, in choosing a program, automatic update is favored as it is more efficient.
Risk Probability Calculators
Not many forex currency traders are gifted when it comes to dealing with numbers. What most currency traders are unaware of is that there is a science in computing for risks. Risk probability calculators are programmed with formulas most of us will never be able to understand. The most important formula in risk probability calculators is the Fibonacci. Using the Fibonacci, the most popular retracement ratios are computed for.
Using a chart, the risk probability calculator will compute for expansion ratios. Basically, what you have to do is input points from the chart into the calculator. With the information, the calculator can tell you whether it is a good idea to trade or not.
The most important thing to remember when trading is that unlike other risk-related fields, the forex market carries a relatively high risk considering its complexity. The tools you use can only serve to lessen risks but they cannot give you sure answers.