Main Differences between Forex and Options
In Forex trading Margin is one of the biggest elements of trading. The maximum margin is determined by each broker and can but up to 1:500, it is designed to allow traders to increase their investment capital so they can make a larger trade, in Binary Options there is no use of margin at all.
With Forex there can’t be any specified numbers on profits or losses. Traders can apply a Stop Loss order, to makes sure no big losses are made, but depending on how the market moves as the position is open losses and profits can be wide or narrow. A trader could lose all the money in his account in one trade. With Binary options the investment is pre-determined and a trader already knows how much he will make if the trade goes well and how much he will lose if it doesn’t.
Closing a Position
With Forex trading you can choose exactly when to close a position as the markets change. When a position opens there are no limits about when it should close that is entirely up to the trader and the decision can be made during the trade. With Binary Options the time frame is pre-determined, and the trade has to play out till the expiry date. Some brokers offer the option of “early closure” meaning you can exit your position at some point during the trade if you feel you are losing, but at a percentage cost.
In Forex trading there are many order types including buy/sell, limit, stop, One Cancels the Other, Trailing Stop, Hedge Orders, and many others. In Binary Options there are five types of orders, high/low, 60 second options, Touch/No Touch, Boundary Options and Options builder.
Some Forex brokers allow trading micro lots, which are 1,000 units of the base currency, the maximum trading amount is determined by each broker and can be as high as 10,000,000 dollars. In Binary Options, the minimum and maximum is determined by each broker. The trading amount can be as low as 5 dollars per trade, and the maximum can be 1,000 dollars, or 5,000 dollars or more.