Coming into financial trading, each of us is faced with a very serious question: what to choose - trading on the Forex market or trading on Binary options? The choice is really difficult, yet these two financial instruments are different from each other and the trader needs to understand what exactly to spend his time and effort on.

Many have heard about Forex, and it has been advertised longer than Binary Options, but not everyone has come across it, because. they were frightened by the complexity of this trading tool. But, like exchange-traded Binary Options, real Forex is trading between banks (Foreign Exchange).

But the substitute for the real Forex market is the retail Forex, which is available to everyone, but it fully reflects the essence and the “trader versus broker” scheme, just like in binary options betting. Simply put, a trader still needs to find a good broker and pull money from him, which the broker earns from simpletons and freebies.

But the question is completely different. With the advent of Binary Options, disputes between BO supporters and Forex market fans do not subside. Each side, foaming at the mouth, is trying to prove that their financial instrument is head and shoulders above the competitor. Well, we will take a neutral position and within the framework of this article we will identify what is worth spending time on in the first place, where the results are faster, where the profit is better, where it is easier to trade.

Forex and Binary options: what is the difference?

First of all, I would like to compare these two financial instruments: Forex and Binary Options. What do we need to trade Binary Options:

• Select price direction
• Determine the amount of investment
• Choose expiration time

A change in price even by 1 pip in the right direction will bring us a fixed profit from 70% to 96% (depending on the broker). We also know the risks before opening a deal.

To complete a transaction on the Forex market, we need:

• Select lot
• Select leverage
• Select the correct account type (fixed or floating spread)
• Understand why and why you need different trading accounts
• Study what the spread is (there is no spread on Binary options, and less headache)
• Select type of order execution
• For pending orders, you must specify its type (Buy Stop, Sell Stop, Buy Limit, Sell Limit)
• Forex earnings come from how many points the price went in the right direction
• In Forex, trading is carried out with the entire deposit at once - the risks are much higher than in Binary Options

I think it is not necessary to say that Forex is many times more difficult for a novice trader. A lot of nuances that every Forex trader must know are not mandatory (or even necessary) for a Binary Options trader.

A person who still does not understand anything about this will very easily get confused in terms and concepts, which, of course, will affect the state of his trading account.

Pros and Cons of Binary Options

To thoroughly compare two trading instruments (Forex and Binary Options), it is necessary to identify all their pros and cons, which we will now do.

Binary Options Benefits

• Huge accessibility for everyone (deposits from a few dollars)
• Speed of development and ease of entry into trading - just two buttons with a choice of direction
• Risks and potential rewards are known before the trade is made
• Make a profit when the price changes by just one pip
• 70% return on investment in just one trade
• You only need 55%-58% correct predictions to be in the black
• Real quotes - the ability to analyze charts on the side
• Opportunity to earn on any type of price movement, not just during a trend
• No spreads or leverage
• More assets to trade

Binary options: disadvantages

• Expected simplicity hides real complexity
• Fixed profit - even with a very strong movement, we will only receive the amount that was known before the transaction
• Possible profit is less than the amount of risk by 10% -30%
• Binary options provoke excitement and desire to recoup
• Without the ability to manage your capital and knowledge in risk management, it is almost impossible to make money on BO
• Advertising aimed at people who don't understand anything about binary options trading at all

Forex: pros and cons

Similarly, we will identify the pros and cons of Forex, which will greatly simplify our task in comparing these two instruments and identifying their common components.

Forex market advantages

• Forex trading with the trend is much more profitable, unlike Binary Options. Profit on Forex is formed from the price movement - the farther it went from the point of purchase, the greater the profit.
• Forex is a very flexible tool that allows you to set pending trades and automatically close them when pre-set conditions are met. On Binary Options, as a rule, it will not be possible to open transactions without the direct participation of the trader.
• Exit the trade at any time. If you decide that you have enough profit or that the price will reverse now, you fix your profit and exit the trade.
• The old Forex companies have a huge turnover of money, which allows them to pay traders amounts of 100-200 thousand dollars at a time without a twinge of conscience.
• ECN brokers - bring traders' transactions to liquidity providers, which, in turn, affects the price movement.
• Affordability is about the same as Binary Options
• A huge number of robots that can trade for you

Disadvantages of Forex

• Forex is many times more difficult for a novice trader than Binary Options
• The psychological pressure on Forex is many times greater than on BOs - it takes more self-control to watch your trading balance grow or how the price moves against your trade, biting off pieces of your money.
• Higher risks than in Binary Options, where the risks are fixed - in Forex, trading is carried out immediately with the entire deposit. You only have a choice of leverage - the speed at which your trading balance will grow if the forecast is correct or decrease if the price goes against you.
• Availability of spreads

What do Binary Options and Forex have in common

Surprisingly, these two financial instruments, namely binary options book trading and retail Forex, are united by the concept of making a profit, and indeed trading in general.

Both Forex and Binary Options DO NOT bring transactions to the real market (with the exception of Forex ECN brokers) - all transactions are carried out exclusively on the brokers' trading platform. It is the same with profits: brokers profit from draining their clients' deposits and pay profits to everyone who earns it.

We, experienced traders, both in Binary Options and Forex, will have to take money from less experienced colleagues. But so it was and so it will be - everyone is responsible for his own actions.

Another thing that Forex and Binary Options have in common is advertising. There are a lot of embellished components in the advertising of these financial instruments:

• 90% Profit in Seconds (Binary Options Advertisement)
• Easy start in the financial market (Forex advertising)

In fact, it turns out that nothing is all that simple, but, of course, they don’t tell a potential client about this. And if on Binary Options you can quickly understand what is happening (I'm talking about how the trading platform of brokers works and where you need to click), then on Forex a complete chaos awaits, from which he will not get out soon.

But the most pleasant common feature, of course, is the profit from trading. Binary options, it seems, have survived their infancy, when there were many times more scammers than adequate brokers, and retail Forex has long passed this stage. With reliability now there are no special problems either there or here, so if you were able to make money on these financial instruments, then you will get your profit.

Which is more profitable: Forex or Binary options?

There is no exact answer to this question. Everything very much depends on the trader himself: his knowledge, experience, personal qualities and preferences.

For example, I am more inclined towards Binary Options, because I am not psychologically ready for Forex. It is very difficult for me to control myself and watch how my deposit crumbles with an incorrect forecast (even if Forex has methods of protection against a complete drain). And at the same time, I can trade very large amounts on Binary Options, but everything is simple there:

1. I decided on the amount of risk in the transaction - it is also the amount of investment
2. Opened a trade
3. Waiting for the result

It is still impossible to lose more than the amount of the transaction, and it is determined long before the opening of the transaction itself. Psychological pressure on the trader, with the right approach, is minimal. In addition, binary options do not have to be trending in order to make a profit.

On the other hand, there are very experienced traders who are good at identifying the beginning and end of trend price movements. Their results at Fores are impressive. Of course, in some cases, their trades are open for weeks, and the profit directly depends on how far the price has gone. In a week on Binary Options, you can make a huge number of transactions, which will bring a very tangible income.

It is difficult to compare the profitability of these two instruments, but be sure of one thing - the profit directly depends on the trader himself. If there is trading experience, then the trader will show very good results, regardless of the trading instrument, be it Forex or Binary Options.

Forex profit: how to make money on Forex

And yet, let's figure out where the profit comes from in Forex and how it depends on the price movement. As in Binary Options, in Forex you need to correctly determine the direction of the price, but if in BO you can simply make a forecast that the price of an asset will be higher in 5 minutes, then in Forex you still need to calculate how much the price can rise.

For example, let's take the EUR/USD pair and assume that we opened a trade for an increase, set a Stop Loss (loss level when the trade is automatically closed). The price went up and we closed the deal at a favorable point for us (Take Profit):

All this distance that the price has passed from the buy level to the close level is measured in points. Each pip is worth a certain price, which we choose when opening trades by choosing the leverage. As a result, the number of points is multiplied by the price of each individual point and our profit is obtained.

If the price went against our forecast, then just as quickly funds were debited from our deposit into the broker's pocket - the further the price went against us (the more points passed), the greater the amount the trader would lose.

Also, a very important advantage of Forex can be considered complete control over an open transaction. On Binary Options, we open a deal and wait for its completion, but on Forex we are free to move Stop Loss and Take Profit (the price level at which the profit is fixed and the deal closes) as we please.

What does this give us? If the price moves very well in the direction we need (for example, up), then we can set the Stop Loss above the level of opening the transaction - i.e. even if the price reverses, we will already receive part of the profit from the transaction. You can also move the Take Profit level farther and farther, thereby counting on getting more profit on one transaction.

Spread - what is it?

There are two price values in Forex: the buy price and the sell price. The difference between these numbers is the spread. Forex brokers make money on this - when you open a deal, your deal is in a small minus and it will take some price movement in the right direction for the deal to go into plus.

There is no spread on Binary Options - the deal is opened with the price that was at the time of pressing the open button, so even the minimum price movement is enough for the deal to go into plus.

Stop Loss and Take Profit in Forex

In the Forex market, you will also have to use tools that are not available in Binary Options (they are not needed there) - Stop Loss and Take Profit.

Stop Loss is the level to stop losses and close the trade. This price level is set when opening a deal and helps to avoid a complete drain of the deposit in case of an incorrect forecast.

The Stop Loss level can be moved during an open trade, thereby placing it in such a way that it is guaranteed to profit from a part of the price movement that has already occurred.

The Take Profit level works the same way. It is also set when opening a trade and can be moved closer to the price or further from the price, depending on the needs of the trader. When this price level is reached, the trader's profit is fixed and the deal is closed.

Buy Stop, Sell Stop, Buy Limit, Sell Limit in Forex

Since we have begun to deal with the main components of the Forex market that are not available on Binary Options, it's time to remember about the types of pending orders.

Buy Stop is a pending order that sets a level above the current price. As soon as the price reaches this level, an up trade is opened. This pending order is placed if the trader believes that the price, after reaching a certain level with an upward trend, will continue to move higher.

Sell Stop is a similar pending order, but for short trades. A price level is set below the current price, upon reaching which a down trade will be opened. This type of pending order is placed by a trader who believes that after the price falls to a certain level, the downtrend will continue.

Buy Limit is a pending order placed below the current price. It is triggered when the price reaches the set price value and opens an up trade. This type of orders is placed by traders who believe that when a certain price level is reached, the price will not fall below and an upward trend will begin.

Sell Limit is a pending order similar to the Buy Limit order, but for short trades. It is also set during the formation of the transaction. The price level is set above the current price, when this level is reached, a down trade will be opened. A trader who created a pending Sell Limit order believes that the maximum price point of this asset or the end of an uptrend is located at this price level.

Binary options or Forex: what to choose?

And here we are back to the main question of this article: what to choose - Binary Options or Forex? There are enough pros and cons everywhere: Binary options are simpler and friendlier, Forex is more flexible in terms of controlling an open transaction.

But no matter how much we talk now about which is better, the choice between these financial instruments is possible only after you try everything yourself:

• You will understand why Binary options bypass Forex
• And why Forex is much more attractive than Binary Options

The availability of both Binary Options and Forex trading is now very large - it does not require a lot of money.

Forex cent accounts

Now many Forex brokers offer their clients to try themselves as traders, while risking a minimum. All this became possible with the advent of Cent accounts with Forex brokers.

This type of account will allow you to open trades for a few cents, which will not allow you to lose too much. Unlike a regular demo account, which both Binary Options and Forex brokers have, trading on a real account is real trading, which will reveal all your qualities and shortcomings. A demo account is just entertainment and nothing more.

Also, no one bothers you to combine both tools in your trading: Binary Options and Forex, making a profit everywhere and accumulating the necessary knowledge and experience. The charts are the same, and what you may not notice in Binary Options may be clear in Forex and vice versa.

Where and when to use Forex and Binary Options

A logical question immediately arises: when is it worth using Forex to get the maximum benefit, and when will Binary Options bring more profit?

Let's figure it out. We already know that:

• Binary options profit is accrued even if the price changes by only 1 pip
• Forex profit directly depends on the strength of the trend price movement

It turns out that it is best to trade on Forex during strong trends - in this case, your profit will be maximum.

And at the same time, while there is a lateral movement or flat on the market, you will not find a better tool than Binary Options:

Everywhere you should use the advantages of each financial instrument to achieve maximum benefits. On the other hand, no one forbids you to trade Binary Options in any situation on the market: be it consolidation or trend. But you can’t trade on Forex during lateral movements - this is, at least, not profitable.

It turns out that Binary Options will allow you to trade on any market, unlike the Forex market.

Between Forex and Binary Options

Most people learn to trade on Binary Options - they are clearer and simpler, moreover, there are no hidden formulas for calculating Stop Loss and Take Profit levels (Forex is a whole science). Everything is clear at once: there are two buttons that open transactions for an increase and a decrease - click and wait for the result.

But this same majority uses Binary Options as a starting point. After studying the many principles of price movement, I want to try myself in something new. In this case, traders go to Forex and try to improve the quality of their accumulated knowledge.

In general, there can be many reasons for leaving Forex traders, for example:

• Some go to Forex because they didn't succeed with Binary Options
• Some traders simply outgrow binary options
• People go to Forex to show everyone their "status" - BO for simpletons, I am much higher than this circus
• Many are attracted by the prospects of the Forex market

The funny thing is that many traders who have gone to Forex from Binary Options come back. Like it or not, but Forex trading is more complicated in many ways, and the risks there are much greater than on BO.

So the bulk of traders are spinning between Binary Options and Forex, trying to find their cozy place. Here, as they say, it's a matter of taste - someone will never leave Binary Options, and someone will not be torn away from Forex by the ears.

Binary Options and Forex Strategies and Indicators

But still, Forex and Binary Options are very similar in nature. The presence of the same price charts greatly unties our hands.

Forex traders use the MT4 (Meta Trader 4) or MT5 Terminal for trading - in it they make forecasts, make deals, develop strategies. But the same terminal is also used by Binary Options traders for technical analysis of charts.

The MT4 trading terminal is an excellent tool that allows you to make forecasts both on a clean chart and using various indicators. Speaking of technical analysis indicators, craftsmen create tens of thousands of new indicators every year that make our lives much easier.

Unlike the trading platforms of Binary Options brokers, where, at best, you can find 10-40 of the most popular indicators, the MT4 terminal has absolutely everything you can imagine. Of course, these same indicators must first be downloaded and added to the terminal.

But after simple manipulations, a trader can use various indicators and combine them into trading strategies. An interesting feature of Forex trading strategies is that most of them can be used on Binary Options. You just need to choose the expiration time.

But the strategies from Binary Options will have to be more reworked for Forex, because in Forex it is important not only the direction of the price, but also the setting of Stop Loss and Take Profit levels.

With the right approach and after testing, you can achieve good results using Forex strategies on Binary Options and vice versa - it all depends on the experience of the trader and his understanding of the market.

Conclusion

The Forex market, like Binary Options, has very clear advantages and the same noticeable disadvantages. Where it is better to trade is, of course, up to you. But nothing prevents you from combining both of these financial instruments in your trading.