Binary Option Trading vs Forex Trading

Forex trading in Malaysia has long been a popular trading instrument, however the industry is are seeing a significant number of former forex traders switch over to trade binary options. Malaysian traders are quickly realizing the benefits binary option forex trading has over spot forex trading.

What is different about these two forms of trading over the same market – spot forex – is the way the brokers allow clients to trade the forex market. On one hand we we have binary option brokers and on the other, forex brokers.

So why is Binary Option Trading far superior to Forex Trading?

“Binary options offer many benefits compared to traditional forex trading for a number of reasons” – Mr Choon Keng Tan – Binary Trader.

Binary options require traders to predict if a financial market such as a forex pair (e.g. EUR/USD, GBP/USD, USD/JPY, AUD/USD etc) will be higher or lower at the end of a predetermined period nominated by the trader. If a trader correctly predicts if the market will be higher or lower then they will earn a return on investment of up to 91% for a successful trade. If they get the prediction wrong, the loss is the amount they invested on the trade. Forex trading on the other hand can be complicated. Forex traders need to get the direct right, know when and where to add a stop loss, a limit and if, and when they should exit the trade. Along the way while a forex trader has a position open they may be charged interest, get stopped out and possibly slippage on exit or even a margin call, that is told to put more funds into their account by their forex broker.

Binary options offer returns of up to 91% in as little as 60 seconds for a successful trade. 

Leverage is what gets most forex traders into trouble, they open positions that are far too big for their account size. Yes, they might have the funds on their account to open a trade, but given the huge purchasing power if a trade goes against them even a small amount it can wipe out their account and they can be then owing the forex broker more money! Some forex brokers offer 400 times leverage, meaning $100 will allow traders to place a trade valued at $40,000.00. Given this, if a trader was trading forex over the popular fx pair EUR/USD the market would only need to move less than 30 points or pips against the trader to mean they have lost 100% of their initial deposit. It is common for forex pairs to have a range of over 100 points or pips in a single day so you can see how easy it is for forex traders to get it wrong and get it wrong quickly and these losses can be open ended. Leverage is a double edged sword, it magnifies trading losses and also profits. With binary option trading, traders know exactly what they are risking and know in advance what exactly they will see as a return in the event of a successful trade. There is no leverage with binary option trading, something not seen in traditional forex trading.

We hope this has helped you understand the difference between Binary Options and Forex and should you wish to start trading Binary Options click here to open a free account with a the highest rated binary option broker for Malaysia.

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