Forex Binary Options are a much less complex and also a less risky way of trading Forex than conventional Forex trading.
Forex Binary Options are much less complex to trade successfully than conventional Forex because you are only choosing the direction of the asset to be “in the money”. There are three steps: First, you choose the market that you want to trade, for example, Currencies. Next, you choose the asset, for example, USD/JPY. And third, you decide whether the USD/JPY will end above or below its current price at the end of the hour. If you decide above, choose a Call Binary Option. If you decide below, choose a Put Binary Option.
There are 2 cases in which you can win your trade. You will be “In the Money” if you choose a CALL Binary Option and at expiry the closing price closes above the price that you purchased. You will also be “In the Money” if you choose a PUT binary option and at expiry the closing price closes below the price that you purchased.
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Risk management is an important consideration for a conventional Forex trader. Many Forex traders have started to trade Forex Binary Options as an alternative to or in conjunction with conventional Forex. One of the main reasons that Forex Binary Options are less risky than conventional Forex are that no leverage is involved. A Forex Binary Option offers an 81% return with no leverage involved so you can never lose more than you invest. This is a crucial distinction from conventional Forex. For example, a Binary Option trade of $1000 with no leverage will profit $810 at the end of the hour, if the option expires just a fraction of a pip ‘in the money’. A conventional Forex trader seeking the same return for a fraction of a pip move will need to trade well over $1,000,000 which equals at least $10,000 on 100x leverage exposing the trader to much greater losses.
As a result, many conventional Forex traders seeking these kinds of profits place Stop Loss orders, only to be shaken out with great losses due to volatility. These situations do not occur when trading Binary Options. Binary Options expire hourly, and replace the need to place Stop Loss orders. So successful trading is more a question of timing than of volatility risk management. In other words, shake-outs are not a worry for the Forex Binary Option trader like they are for a conventional Forex trader.
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