Binary Option Trading vs Forex trading: So what’s the difference?

bo vs fxThe story of binary options trading started back in 2008 when U.S Securities and Exchange Commission approved it. On the other hand, Forex trading has been around for way longer, more that 40 years already. Forex is the largest financial market with high liquidity and as much as $5.1 trillion is traded on it every day. This trading is based on currency exchange, while Binary options are based on the price movements of various underlying assets such as commodities, indices, currency pairs, and stocks.

So what are the main differences between these two types of trading? Let’s find out!

24 Hours Open Market

One noticeable difference is that the Forex market is open 24 hours a day, 5 days a week, whereas binary options market is open only during the business hours when the underlying asset market is available. With binary options, you have to be a bit more patient and organized in regards to the time you are planning to place your trades.

Leveraging Support and High Liquidity

Binary options trading lets you trade only the balance that you have on your trading account. This way, you are more in control and cannot lose more than you have invested.

 

Transaction Costs

When trading Forex, a trader has to pay brokers. It comes either in the form of commissions for each transaction they make, or spreads or even both. When trading binary options, there are no brokerage fees or commissions for each trade. I

Asset Choices

When trading Forex, a trader is limited to just currency pairs and you can not choose trade any other assets. With binary options trading, there is a wide range of underlying assets to choose from. We have already mentioned currency pairs, market indices, and commodities such as gold and silver, etc.

Social Trading Support

What is to the great advantage of binary options trading newbies is the opportunity to do social. Any trader who is new to the binary options market and doesn’t have much expertise or market knowledge can start trading binary options. All he needs to do is to simply join a social trading community and copy the win trades of more experienced investors.

On the other hand, Forex trading requires a lot more expertise and market knowledge. Forex brokers do not offer social trading support, so it’s difficult for total beginners to explore Forex market without already having some trading expertise.

Conclusion

When talking about the difference between binary options and Forex trading, a trader has to understand those very important differences and the amount of market expertise that they have. There are many pros and cons to both trading systems. Educate yourself about the differences between them and choose the one which suits your trading need and understanding of the market trends. For beginners, we would rather advise choosing binary options since you can take advantage of social trading to work on your trading skills simply by copying another experienced investor techniques. In addition, binary options are easily accessible to the general public and the risks here are limited. This can all be a great advantage for new traders.

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