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Forex vs Binary Options - 2. Risks & Money management




Forex vs Binary Options - 2. Risks & Money management


FOREX

BINARY OPTIONS

Risk : Reward ratio You can control risk : reward ratio and adjust it. Traders are able to choose lower risks with lower returns or higher risks with higher returns. You cannot control risk : reward ratio. The ratio is always preset, with risks being always high. Higher risks allow to achieve higher profits faster, but they also make you lose everything faster.
Trade control You can control the amount of profits/losses you make by closing trades sooner or leaving them open for a longer than initially intended period of time. You cannot control a trade or terminate it in order to gain more profit or avoid losses. A trade has its predetermined expiration date & time, which you select when you open a trade (could be anywhere from 1 minute to 1day, week or month).
Time limits and contract expiry Your trading contract has no time limits & no expiration. You can keep a trade open as long as you like and close it at any time. Time limits apply. Your contract is valid only during a certain fixed time limit: 1 min, 15 min, 1 hour, day, week etc. Once the expiry date/time has come, your contract has no further value, it expires. Upon expiry you're either “in-the-money” – gained profit, or “out-of-the money” – lost money.
Money management Money management knowledge and good trading skills are essential in order to properly manage trades at all times, anticipate profit potentials and calculate losses. Your profit amount $ and loss amount $ are known in advance for each trade and are always fixed. You can project your profits/losses instantly.
Profit potential Each trade has an unlimited profit potential, since it can be left open for a long as a trader decides to. Each trade has a fixed profit amount, regardless further market moves.
Loss potential Risks of sustaining larger losses are higher. Stop orders and trailing stops are designed to limit and control risks. Yet, there is no guarantee that stops will be executed each time without additional slippage. You don’t need to worry about the stops or extra losses. It’s either hit or miss: "in the money" – you win a bet, "out-of-the-money" – you lose a bet.
Trading cost Extra cost includes Forex spreads, or spreads + commissions. No extra cost. As a rule, there are no spreads and no commissions.

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February 1, 2017

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