- Written by Wang Rihui
- Parent Category: Online Trading
- Category: Binary Options
- Hits: 1462
Binary Options is yet another tradable instrument that is gaining both popularity and notoriety among traders. Its original purpose is to simplify the Forex/CFD to make it easier for beginners to place trades but gradually, it also starts to attract the attention of experienced Forex/CFD traders.
1. Same instrument being traded on Binary Options and Forex/CFD.
2. Both short and long positions can be taken on Binary Options and Forex/CFD.
3. Profits and losses depends on correct prediction of direction of market moves.
1. Amount of profits and losses for Forex/CFD is dependent on the difference between entry and exit positions while amount of profits and losses are predetermined for Binary Options (e.g. win or lose depends on correct direction predicted and even on 0.1 pips).
2. There is no time limit on the holding period of positions for Forex/CFD while Binary Options have expiry time which determines win or loss
3. Positions can be exited any time for Forex/CFD while positions cannot be exited most of the time for Binary Options once placed until expiry time.
While similar fundamental and technical analysis can be used for both Forex/CFD and Binary Options, the strategies to be adopted are usually quite different. Martingale strategy is a popular strategy adopted for many Binary Options traders which make it appear like gambling. In addition, since it only has binomial probability, it is no difference from betting on hi-lo if no analysis is applied. In addition, trading on 1 minute, 2 minute and 5 minute time frames is also popular for Binary Options but it tends to produce arbitrary results since most analysis do not work well under such time frames.
The notorious part of the Binary Options comes from the Binary Options brokers. Unlike Forex brokers which typically just assigns account managers to help with account issues faced by traders, Binary Options tend to have very pro-active account managers who will urge traders to deposit more money into the account through threat or reward and may even offer trading advice to ask traders to follow during online trading session, often taking on great risks. This has caused numerous complaints especially for those who feel cheated especially among novice traders. Therefore, be prepared to handle such calls from account managers if you are trading on Binary Options. Avoid high risk trades at all costs. In addition, with the closure of Banc De Binary, one of the oldest Binary Option broker and increased regulations from European Union, caution is to be exercised when choosing Binary Options broker.
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