Binary options trading can offer several distinct and exciting advantages over traditional Forex trading. As a relatively new form of trading, binary options are growing in popularity as a straightforward and potentially very profitable way to speculate on the price movements of a whole range of underlying assets. Using similar techniques of analysis to traditional Forex trading, currencies price movements can be reduced to the simple question of higher or lower regardless of the degree and removing the focus on pips and points. With average earnings of around 80% of the initial investment on every successful position, and many brokers offering a 15% return for those positions closing out of the money, the risk:reward ratio has also attracted many traders who are looking to reduce their risk exposure and demand more secure money management.
Everything is predetermined
In terms of risk and reward, everything in binary options trading is pre-determined and guaranteed prior to taking a position. Unlike traditional Forex trading, where traders can choose to set stops and limit orders to determine their trading outcomes in the event of a successful or unsuccessful trade, binary options profit and loss is fixed on each investment. Not only does this provide traders with the ability to manage risk easily, it also means that even the most volatile market movements can detrimentally affect the potential losses. Forex brokers will require a premium, usually within the spread, for guaranteed stops and the unwillingness for more experienced traders to use these leaves them potentially exposed to excessive slippage on their stop-losses.
Stop losses are simply not required
For traders who have spent a large part of their Forex lives worrying about where to place stops whilst maintaining the requisite risk:reward ratio binary options may come a breath of fresh air. Binary options, in their most common form, only require price to close a single point above or below the strike price to be deemed profitable. There is absolutely no need for any stop orders and the only two decisions that binary options traders are required to make is when to enter the market and for how long. Due to the fact that the expiration of binary options are not reliant on the degree to which they close above or below the strike price, even the most awfully-performing trade could potentially be profitable without exposing the trader to any further risk than agreed prior to the purchase of the options.
Realistic profits in just 60 seconds
As we all know, Forex markets rely on momentum to generate profits. After deducting the spread trades are typically in negative territory until the market begins to move favorably. Trading in-and-out of positions in under a minute therefore requires the market to be moving relatively fast, even for the most nimble of scalpers. Trades lasting on minute may generate a small handful of pips using traditional methods of trading Forex whilst 80% of the initial investment can be achieved trading binary options. Due to the fact that binary options require the market to move only incrementally higher or lower than the strike price, 60 second binary options are an increasingly popular tool for momentum traders. For those who like to trade quickly, this is not only one the fastest but also most rewarding ways to trade currency price movements.
Diversity and hedging reduce risk and increase opportunities
Binary options brokers offer markets for many more underlying assets than only currencies. For those who want to broaden their horizons and trade stocks, commodities and other financial markets from one platform binary options offer an excellent alternative. While Forex brokers are generally limited to currency-only markets, binary options brokers typically offer in excess of 100 different assets to look for opportunities. Furthermore, binary options brokers allow for opposing positions to be taken within a single market allowing traders to hedge poorly performing trades and reduce their financial exposure. Most Forex brokers not allow opposing trades with the effect that an order in the opposite direction will close the initial trade. Binary options brokers, however, typically provide profits of 80% while losses are limited to 85% of the initial investment. Hedging will therefore reduce losses to just 5% in most cases and make binary options ideal for breakout and reversal traders.