The Great Forex – Binary Convergence

Convergence is a term I use to describe a point in time in which trends meet. This is a crucial

We are all familiar with the term ‘trends’. For example, there is a trend in binary options to offer more long term options and better charting for analysis, such as candlesticks. There is a trend in forex to offer lower barriers to entry for new traders utilizing social trading tools.

Convergence is a term I use to describe a point in time in which trends meet. I view these as key moments to analyze and act. Being able to identify a convergence is like knowing when the housing market is about to explode, and therefore being able to invest at the right time. The examples I mentioned above are clearly a convergence in the financial trading sector. Binary options technology is becoming more like forex trading and forex trading platforms are simplifying in resemblance to binary options.

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Hindsight is 20/20

When you look at an event after it has happened, the reasons behind it are usually very logical and simple. The same is true with convergence analysis – the reason why convergence happens is simple and logical. In the case of Binary – Forex, the first point is that they are similar in their basic nature – predictive trading on currency pairs or other instruments.

The simplicity of Binary lends itself to easier conversion, but a high attrition rate with the lack of ability on the part of the trader to instigate long term trading strategies. Forex on the other hand allows traders to implement profitable strategies based on market analysis, but the complex nature of the platform and registration process makes conversion more difficult. Each is trying to leverage the strengths of the other while mitigating their own weaknesses.

Next steps to acting on this knowledge

There are three distinct groups of people who need to look at this information:

  1. Existing binary brokers
  2. Existing forex brokers
  3. New brokerages who have not decided which path to take

For existing brokers, whether they are binary or forex, a decision to implement the other platform should be on the table. From what we see at Leverate, this is already starting to happen with binary brokers, and some homework is being done by forex brokers.

Those who move first will have market advantage as we can add to the equation of convergence the trend of higher and stronger competition. Brokers will need to consolidate and grow in order to compete, and adding the other platform will give them the tools to do so.

When it comes to new brokers, there is a much more interesting discussion to be had. Ultimately, most new businesses do not have unlimited budgets, so taking both from day one is not a viable option. Which platform to choose first and when to add the second one is a very personal decision that needs to be made. My personal advice is to look at two main factors and give weight to each:

  1. The character of the business – Determine the business’ and the management’s strength in terms of being able to generate traffic. If your core competence is attracting forex traffic, open a forex brokerage, and vice versa for binary.
  2. Your planned strategy – Decide whether acquisition or retention is more important to you. If conversion is more important, consider binary, if retention is more important, then consider forex.

The bottom line, as always, is have a go to market plan, including your differentiator and how to leverage it.

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