Difference Between Binary Options and Forex, Stocks Trading

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  • Binarium
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  • Binomo
    Binomo

    Good Broker For Experienced Traders!

What Are CFDs (Contracts for Difference) and Why Do You Want to Trade Them?

CFD or Contract for Difference is a financial instrument that doesn’t involve the purchase of the underlying asset. The investor’s goal is to predict the direction of the future price movement and capitalize on the difference between current and future prices.

In general, CFD trading means you must close the deal in future to get either profit or loss in result. Forget about expiration time – you can close your deal at any time you want.

If the prediction is correct, the trader will earn a profit. The amount of it will depend on conditions of each particular deal. This makes difference between options and CFD trading, because while trading binary, classic or digital options you may just wait for expiration time and the deal will close automatically.

In CFD trading there is no expiration time. But you are able to set stop/loss and trigger a market order if the price gets a certain level.

CFD forex trading on IQ Option

Why to trade CFDs?

CFD is an alternative way of trading, which has its own advantages and disadvantages. When compared to more conservative trading tools, contracts for difference can boast the following benefits:

Margin trading. Contracts for difference offer the usage of a multiplier, an extremely powerful trading tool. With it, one can control the position that exceeds the amount of money invested in it.

When picking the 10:1 multiplier the trader gets an opportunity to open a $1000 deal with only $100 at hand. The other $900 would be automatically provided by the lender. What are the benefits and risks of trading on margin? The potential profitability (as well as risks) will also be magnified. Imagine investing $100 and getting the return that is comparable to a $1000 investment. That’s the opportunity a multiplier can offer. However, remember that the same goes with potential losses as these would be multiplied as well.

Fast trading. Trading on CFDs does not require massive time commitment and can be practiced both professionally and casually. Of course, for tangible results it is required not only to spend enough time on trading but also to undergo an in-depth training. Still there is a possibility of executing several deals spending less than 15 minutes a day, which certain traders will find beneficial.

Available CFD types

New CFD types, available in the IQ Option trading platform include CFD stocks, Forex and CFD cryptocurrencies.

Forex

The Forex market is the world’s largest and most liquid financial market. When performing the exchange of currencies, you’re expecting the price of a currency will grow and you’d be able to sell it back to make some profit off of that price difference. This kind of price speculation is the basic principle behind trading on the Forex market. For quite a while Forex trading was available solely to institutional investors such as banks, yet the development of the Internet let ordinary people join the international currency market.

Cryptocurrencies

The hottest trend of the trading season, cryptocurrencies drew the attention of both finance professionals and regular people. Now you also have a chance to capitalize on the movement of the six most popular cryptocurrencies.

Bitcoin has been growing against the USD, though with a series of downfalls, for years. Ethereum demonstrated an exponential growth pattern and grew from $15 to $371 in a matter of three and a half months. Fast-paced growth and speculative opportunities are not the only reasons why the financial community is paying close attention to cryptocurrencies. They are believed by some experts to change the world financial system forever.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect For Beginners and Middle-Leveled Traders!
    Free Demo Account!
    Free Trading Education!
    Get Your Sign-Up Bonus Now!

  • Binomo
    Binomo

    Good Broker For Experienced Traders!

Etherium rise and fall

It is not necessary to invest in expensive hardware worth thousands of US dollars to mine cryptocurrencies on your own or deal with overcomplicated online exchange points. When trading with IQ Option, the process of trading the cryptocurrency of your liking is as smooth as any other trading operation. The world’s most popular cryptocurrencies are now close at hand.

CFD stocks

CFD stocks trading will be available on IQ Option platform in October.

When trading CFDs, instead of buying a share in a company and becoming one of its owner, you forecast the future direction of the price action and capitalize on the difference between the current and the forthcoming prices. Choose from the world’s largest and most known company. Follow corporate and industry news to capitalize on CFD stocks using fundamental analysis or apply your knowledge of technical analysis to trade existing market patterns.

The New York Stock Exchange is the largest stock market in the world that trades a daily volume of $22.4 billion. The FX market can boast $5.3 trillion of a daily volume traded. Forex, however, is not only 200 times bigger than the world’s largest stock exchange, it is also extremely volatile. Exchange rates constantly fluctuate, creating numerous speculative opportunities for traders willing to face the risks of high volatility.

Risks and multiplier

The risks associated with CFD trading mostly lie in the sphere of using a multiplier. A multiplier is a truly double-edged sword. When you get the forecast wrong, the losses your account will incur will also magnify. This is the main risk of using any amount of borrowed capital and especially high multiplier ratios, e. g. 100:1 and 1000:1.

If you are not being deliberate enough you can incur heave losses in a relatively short period of time. When you trade with a multiplier and the trend starts moving in the wrong direction, you will start losing the money to cover the losses in borrowed capital. Volatility spikes can therefore eliminate your entire margin in no time.

Certain Forex dealers would offer multipliers as high as 3000:1. Not only it is risky, the strategies involving extremely high multiplier ratios have little to no chances of providing positive returns in the long run. Knowing the risks of margin trading is essential to successfully utilizing this tactic in the Forex market.

NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
In accordance with European Securities and Markets Authority’s (ESMA) requirements, binary and digital options trading is only available to clients categorized as professional clients.

GENERAL RISK WARNING

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
87% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Binary Options vs Forex

Binary Options vs Forex Which One You Should Choose?

Binary Options vs Forex | If you are just about to start investing, you may wonder which one you should choose. Or maybe you have tried other one and you are thinking if you should change to the other? Or maybe you have just another reason why you want to compare the two and to know if superior in some way. In this article I will go through pros and cons of both so that you have easier decision to choose the one that fits your personal preferences better.

Binary Options are actually a new form of investment, while foreign exchange trading has been for as long as there have been various currencies. Therefore, it is obvious that the currency markets are much bigger by turnover. In fact, they are the world’s largest market, currency trading takes place five days a week 24 hours a day averaging over $ 5 trillion per day. When you invest in currencies, you are directly competing against other top professional investors such as Warren Buffett and George Soros.

Binary options markets are hundreds of time smaller than currency markets, and there are surprisingly small number of professional investors involved. Also, investors have much more trading assets to choose from than currency traders have. In addition to that, only a few people know how to use auto traders like binary option robot, when for currency traders, highly sophisticated trading software is almost a necessity.

Binary options trading is much easier for novice investor than forex trading

How Binary Option Robot Can Change Your Life? Check This Out!

Which One Should You Choose Binary Option vs Forex? Read Out Thorough Investigation And Find Out Which One Is Better And the Reasons Why?

How to Make Money with Binary Option Robot

Top Binary Option Robots in Ukraine

Claim your free binary option robot, get started with three easy steps:

  • Name of Robot
  • Min. Investment
  • Min. Deposit
  • Rating
  • 1. Your Binary Option Robot will analyse the market and decide, which asset (currencies, indices, commodities and stocks), is right to trade at that point in time.

    2. The Binary Option Robot Will Predict the Price Movement

    Your robot will assess a wide-range of factors, and then make a prediction on how the assets price will move, saying: Call (up) if it believes the price will rise and Put (down), if it believes the price will fall.

    3. Decide on how much you want to Invest

    Then you need to decide how much you want to invest in the commodity and when that investment will expire.

    4. Collect your Earnings

    Finally, you collect your earnings (the good part!)

    TABLE OF CONTENT

    Main Reasons To Choose Binary Options

    First I’ll go through the main points why you should choose binary options over forex. After that I will tell you what kind of investors should choose forex trading over binary options. Basically, by far the majority of investors binary options fit much better, while currency trading is suitable for a small minority of people who are able to specialize and possess certain characteristics.

    • With binary options, you have much wider selection of different trading assets. In currency trading you trade only currencies. Binary Options allows you to trade, forex, commodities, indices, stocks and basically any investment with a variable value. This is limited only to what the broker is willing to take to the selection. Unless you only want to trade currencies, this is huge factor and main reason to choose binary options.
    • In binary options trading, competition is not that fierce, at least not yet. As already mentioned, the foreign exchange market is world’s largest market by turnover, where participants are the world’s smartest and most successful investors. In foreign exchange market, you are competing directly against these investors. In binary options investing, competition is still at a very low level. The main reason is that with the really large sums, direct investment in equities is cheaper. This gives a great opportunity to investors who are investing with smaller amounts, the toughest competitors are totally absent and all the talented mid-level competitors are so far absent also. You should use this great opportunity now while you still have time.
    • Binary options investor gets access to much greater bonuses. In foreign exchange market, competition is relatively stable due to its long history. Sometimes new viable comes into the market and shakes it a little bit by offering cheaper prices, but usually consumer will have to settle with what is currently offered. In binary options trading, markets are still constantly developing. New brokers appears every day, and they are trying to attract customers to themselves with large and juicy bonuses and benefits. For you as an investor this is a great thing, all freedom of choice is left to you.
    • As a binary options investor, there is a number of great software available for free. Intense competition does not extend purely into brokers, also different software developers are having tough competition because of scarcity of customers. As a result, the best applications such as The Real Robot, Binary Hedge Fund, Binary Stealth, Copyop, PayDay FM and OptionBot 2.0 are all available completely free of charge for now. This may not continue for very long so I recommend you to register all of these through our links while you still can. In this way, you ensure that you will have them for free in the future also if they become chargeable. On the other hand, best forex software costs at least thousands of dollars, and if you want that you have any hope of progression as an investor, you are practically forced to use these. This will drive investors with little money into hopeless situation.
    • With binary options you know exactly what your payout will be if you hit right. In forex trading, you can never know exactly how much you will earn in the best case or lose at worst case. This makes the choosing of right investment amount extremely difficult. Sometimes you will have the risk a bigger sum what was originally intended. With binary options, you know beforehand exactly what is your potential winning and what is the potential loss amount if the investment goes wrong.
    • With binary options, you choose beforehand when you wanna close the position. Some investors may view this as a disadvantage, but I think this is clearly an advantage. When binary options investment has been set, you do not have to worry about or keep track of it in any way if you do not want. You can spend time with your family or even go to the beach. In forex trading, you need to follow the changes in value of the investment continuously and to consider whether now is the best time to close the position or would it be perhaps sometime in the future. At worst, you will not be able to do anything other than follow the investment.
    • There is no transaction costs in binary options. Binary options investor do not pay any transaction costs. Expenses are in fact already directly tied to payout percentage. In forex trading transaction costs can be quite high and the minimum costs can make investing with small amounts unprofitable.

    Candlestick chart is the most common form of forex chart

    Main Reasons To Choose Forex Trading

    Forex trading fits better for a small number of experienced investors who know for sure what they are doing and invest in larger sums. If you invest in currencies using mere intuition, you will only lose your money.

    1. If you have comprehensive expertise about the currency markets. There I mean the know-how that comes from years of studying and practical experimentation. That is, if your expertise is such a high level that the acquisition of the same skills with binary options would take you a really long time. You also have to remember that skills must be such that you can apply it directly to the practice profitably. Mere theoretical knowledge without the ability to apply does not take you very far.
    2. You want to invest only really large amounts of money. Most of the binary options brokers allows you to invest only up to $ 5000 at one time. Some of us this amount may be too small. In currency trading, you can set investments worth even tens of millions of investment at once. With such a large sums, transaction costs are also significantly lower proportionally what they would be in binary options.
    3. If you are not interested in other trading assets except currencies. If you’re absolutely sure you want to invest exclusively currencies in the future also, currency trading is probably a better option. Even in that case I recommend to starting with binary options using small amounts of money and gathering some knowledge before you decide to convert fully only in currencies.,

    The Difference Between Forex and Binary Options

    Though it looks similar, the binary and the forex trading is very different from each other and it is of high importance to understand the differences in order to be successful.

    The Basics

    The binary options are contracts which have a fixed risk and reward ratio. The binary options trading requires you to predict the direction of an underlying asset within stipulated duration. The binary options are available for commodities, stocks, indices, and currency pairs. The traders are informed their reward upfront in case their prediction turns out to be correct.

    Binary trading, as the name suggests and as explained earlier, requires you to predict the direction of the asset. The setup is very simple; traders get 80 percent payout in case their prediction is right. For example, if you invest $ 100 on USD/JPY and payouts is 80 percent for the winning trade, in this scenario if you predict that the USD/JPY will move higher at expiry and if that turns out to be true then you receive your investment amount ($ 100) plus the payouts (80 % of $ 100 that is $ 80), totaling to $ 180, however, if the USD/JPY moves in the opposite direction of your prediction then you will lose your investment amount of $ 100.

    To be a successful binary options trader, you must win a majority of your trades. While in the case of the forex trading, you are allowed to set your profit target and stop loss for the trade, which allows you to make a profit even if the underlying does not achieve your set targets. So, in the case of the forex trading, the traders can make money even if they do not win a majority of their trades.

    Both the forms of trading are tradeable online, and also you can start trading with small capital. Traders speculate on the movement of the underlying in both the markets and if the prediction is true both reward the traders with the handsome amount.

    Variability

    In binary options trading, the traders predict the direction of the next move within certain time period. In this way, there is no variability in the risk or the profit potential. As the name suggest, the binary market operates on only two outcomes (Up of Down).

    While in the case of the forex market, the traders are required to predict the direction but also they have to estimate how high or how low the asset can go. This way there is an uncertainty in terms of the return and a higher risk.

    The forex market doesn’t have a ceiling on how much money one can make or one can lose unless the trader’s use risk mitigation tools like stop-loss which limits the amount of loss one can have in a transaction. Meaning, the trade will automatically close if the stop loss has been hit. Similarly, the trader can decide how much money they want to make by deciding the value at which they want to close the trade.

    So, in the case of the binary options, the maximum amount of loss could be the entire investment amount whereas in the case of the forex the risk can be mitigated by using certain tools.

    Expiry

    The binary options trade with specific expiry durations and once the trade has been initiated, the traders have no control till the expiry over their transaction. Each and every binary option have a specific expiry attached to it and the trader needs to select the expiry before initiating the trade. Though some brokers allow closing the trade before expiry with restricted payout options, the majority of the brokers does not allow to close the trade before expiry.

    However, the forex trading allows you to initiate and close the trade whenever you want. The rollover is possible in case of the forex trading while the majority of the binary broker does not offer this facility.

    Leverage

    The forex trading allows to invest higher capital with the leverage allowed by the FX broker, but such facility is not available with the binary options trading. This allows the forex trader make higher winning with limited investment but in the case of the binary trading, the trader can only allow investing the money which is available on the account or the amount which is restricted as per the brokerage site.

    Types

    The binary trading offers 5 variants of the trading types. These options are high or low, 60 seconds, one touch, boundary, and option builder. Whereas, the forex trading offers several option types for the trading including buy or sell, limit, stop, One Cancels the Other, trailing stop, hedge amongst others.

    Although the forex trading and the binary options trading look similar, there are some striking differences and one should be aware of these before initiating their first trade.

    Pros and Cons of The Forex and Binary Trading

    In the recent past, the binary options trading has seen an unprecedented rise. The little known binary options of early 2000, now have more than 400 operators who offer binary trading.

    Accepted, that the binary options trading is growing at a rapid rate but why you should indulge in it? Or why should you learn a new trading platform when you are already deep into forex trading? Is it really superior to already known trading mechanisms?

    There are several advantages and disadvantages of the forex trading and the binary trading. The following text describes some of the most pros and cons, and hopefully, it will assist you in making the selection.

    Maximum Risk

    The biggest advantage of the binary trading is that the traders are aware of the maximum risk per trade, and it is the amount of money the trader invest in the underlying. Certain brokers, also allow you to close the trade before the expiry allowing you to further cut the losses, of course with certain conditions.

    However, the same is not true for the forex trading. Even if with stop losses, you cannot be 100 percent sure that you will lose only the pre-decided amount. Though less likely, there is a chance that you may lose higher amount due to slippages, illiquid asset, price jumps, technical issues, amongst others.

    Flexibility

    In the case of the binary trading, except high or low options, the strike prices are set by the broker and even if you have a fair idea on how an underlying asset will behave, you cannot place an order to be executed at certain price points. On the other hand, the forex market offers the flexibility of placing limit orders or market orders during market hours to suit your requirements.

    In an open trade, there are limited brokers in the binary arena who allows you to close before the expiry with certain conditions while the majority of the broker disallow pre-closing of open trade. On the other side, the forex trading allows you to close the trade even after 1 second of opening the trade, giving you a complete control over your transaction.

    If you are on a winning trade, then the forex trading allows you to scale the investment and gain higher returns, whereas, the risk and rewards are fixed in the case of the binary options trading.

    Cost

    The forex trading attracts transaction costs in terms of a brokerage or spread or both. Whereas, in the case of the binary trading there is no addition cost for trading the instruments.

    Assets

    Unlike, the forex trading which has only one asset type for trading, the binary options have evolved to provide trading in commodities, stocks, indices, and currency pairs. This is one of the biggest advantages as one can diversify the trading portfolio by staying only with one broker whereas the same cannot be said for the forex brokers.

    Risk Volatility

    This is another advantage for the binary options traders. As the traders are well aware in advance the maximum loss they can incur in a single trade. So the events which induce high volatility in the market have a limited impact while trading with the binary options. Also, along with the risk, the reward is also fixed in the case of binary trading, and there is no possibility of scaling in more amount to gain higher rewards.

    Whereas, in the case of the forex trading, the market reacts to events and sometimes the reactions cases heavy volatility increasing your risk multiple times. For instance, if you have taken a position in a specific currency pair expecting it to move higher, an unfavorable event can crash the prices of the currency pair, giving you no time to cover your losses. This way the volatility risk is very high in the case of the forex trading compared that with the binary options trading.

    Errors

    The errors in entering the trade are very low in the case of the binary trading as there is only one action which needs to be taken which is to open the trade and the rest is being done by the software. The binary options trading does not offer limit orders or stop losses for adjustments, these have their own advantages and disadvantages.

    Even if you are a professional trader in the forex trading, your one mistake has potential to wipe your entire account. For instance, you forgot to exit from an open trade and the tide has turned unfavorable, in that case, the trade will continue till you may lose the total amount available for the trading in your account. Such errors will never occur in the binary trading, as the expiry is set and the trade will close automatically limiting the loss only up to your per trade investment amount.

    Finally

    As discussed above, both the platform provides ample opportunity for the traders to make money and both offers distinct advantages and disadvantages over others. The above text provides definite insights into both the trading world. However, the ultimate decision of selecting the trading market rests in your hand.

    Best Binary Options Broker To Start With

    My number one recommendation is IQ Option, the best broker site there is. When you invest with IQ Option you can be sure that you can start easily and effortlessly. They have comprehensive learning materials, friendly customer service and brilliant bonuses. Besides all that you know that your money is fully secured with one of the world’s most trusted broker sites. When you open an account to IQ Option by clicking the button below you are qualified to get 100% bonus when you deposit at least $ 200. Unfortunately, IQ Option does not accept US customers, so if you are from the United States, I recommend reading our GOptions, CTOption of Porter Finance reviews.

    Conclusion: Binary Options vs Forex

    As you may have came across many times in this article already, my personal recommendation, especially for novice investors is definitely binary options. You get to compete against other beginners from the same starting line, and you will also might find that investing can be really fun. Forex trading is a hard game dominated by experienced professionals. For a novice trader, it is really hard to make profit with forex trading, most likely result is a rapid loss of money. If you are nonetheless fascinated by the currencies I recommend investing in them by using binary options.

    The main differences between Forex and stock market

    Which market is better to trade in? This is one of the frequently asked questions of those who do not know the fundamental difference between Forex and stock markets. And although it seems that the assets are very similar (principles of trade, rules of conduct of the market),there are a lot of differences. I have already touched this topic partially in the last article, but judging from the questions, there is a need to give this subject more attention. I will try once more to specify exact differences between stock and currency markets, and the decision is up to you!

    Which market is better to trade in: Forex vs stock market

    Leverage

    It’s kind of a bonus from a broker who allows the trader to open positions in greater volume. At first glance it seems that this is a great offer, in fact, with just 1000.e. if the leverage is 1:100 you can open a position of 100 000.e. receiving a yield of 1% not 10.e. abut immediately 1000! But here is the downside: when the loss is just 1%, a trader with that shoulder lose the entire deposit. Why experienced traders suggest a careful use of leverage, given the strategy of risk management (risk on positions not more than 10% of the deposit).

    Forex: the leverage offered by the broker is 1:100 — 1:500;

    stock market: the leverage is in the range of 1:1 to 1:10.

    The greater the leverage provided to the trader by the broker, the greater the likelihood that the broker uses all means to extract money from the customer.

    Transfer of open position to the next day

    For intraday strategies, this is not important, but in Forex, for example, dominate medium – and long-term positions. In case of their transfer swap accrues (a kind of commission).

    Forex: it is possible to transfer open positions to the next day when you pay the broker a commission;

    stock market: transfer to the next day is impossible or possible only in the case of credit shoulder 1:1, i.e. at the expense of own funds.

    Minimum transaction size

    Forex brokers are trying all possible ways to attract customers by offering minimum trades from $ 1 with a minimum deposit of $ 10 or more. Which market to trade in? For those who have limited financial opportunities in the Forex market, because here the minimum volume of the transaction amounts by money equivalent. In the stock market the minimum lot size is 100 shares, 1 share, however may cost $ 10, and may cost $ 500, consider yourself.

    Forex: 1-50 dollars;

    Stock market: 100 shares.

    Minimum Deposit

    Part of Forex brokers do not set restrictions on the minimum deposit. The smallest value of this parameter is in binary options — from $ 10. Forex brokers — 100-1000 dollars. In foreign stock markets to start with less than 10 thousand dollars makes no sense, although there are offers from 2 thousand.

    • Forex: 10-1000 USD;
    • stock market: 2-10 thousand dollars.

    The value of one point

    Pips — another name for points. For example, in the quotation of currency pair EUR/USD 1,2733 1 point is equal to the value of 0.0001, in the quotations of securities 1 point is 1 cent (0,01).

    Forex: the volume of deals in $ 1,000 1 PIP is 10 cents;

    stock market: the volume of the transaction $ 1,000 (e.g., 100 shares at $ 10) value of 1 point is $ 1.

    The average daily volatility

    Currency pairs are considered to be less volatile compared to securities. Depending on the output statistics of the shares of a company can jump in both directions by 10-50% in both directions in just 1-2 hours, whereas the average currency change its value at 0.5-3% daily.

    Forex: the volatility of 0.5-3%;

    stock market: leverage of 0.1-50% or more.

    Number of trading instruments

    Which market to trade in? For reasons of diversity only in the stock market. The currency market is essentially pegged to the U.S. dollar (it expresses the value of other currencies). And if the dollar is stable, the market is sluggish and monotonous. The situation is different with stocks, where liquid securities can be found in all industries.

    Forex: currency pairs not more than 10;

    stock market: the number of liquid shares, including “blue chips” — a few thousand.

    The cost of the trading terminal, strategies, signals, EAS

    Forex brokers already pre offer their clients several trading terminals to choose from, there are free testing strategies and signals.

    Forex: free terminals, there are free and paid strategies, expert advisors and signals;

    stock market: the monthly fee for the trading platform and the provision of charts.

    Working time for trading

    In Forex you can work 24 hours a day, the stock market activity coincides with the opening of major exchanges.

    Forex: how much you want and whenever you want;

    stock market: trades are performed when the exchange is open.

    Transactions for the purchase and sale

    Here, in what market it is best to trade, is determined by the goals of the trader and his risk appetite. Forex allows you to make trades in any direction, in the stock market open short positions without a covering may be prohibited. For example, during the IPO if the trader has actually no cash shares, then he cannot sell them.

    Forex: free buying and selling;

    stock market: possible ban on the sale of shares without real coverage.

    Preparation for work

    Forex: 30 minutes;

    stock market: a few hours (for the analysis of the market. Currency pairs in times less than the number of shares. So there are even special filters to work with stocks).

    The cost of the transaction

    stock market: spread, commission for the opening and closing of the transaction, exchange fees.

    When trading in Forex in small volumes, the question of taxes is not raised (you need to pay, but nobody does). When trading with securities it is hard to avoid taxation.

    Equipment

    If you have only one laptop, the question is “which market to trade in?” not worth it. For trade 3 currency pairs it is enough. To trade stocks you need at least 2 monitors for permanent monitoring of schedules.

    Volumes

    Forex is considered to be an OTC market, excluding currency futures, because there is no information on the volumes of transactions. The stock market volumes committed on exchange transactions are available to every trader.

    Summary. Which market is better, everyone decides for himself, but I think you already noticed the difference. The stock market is more complicated, more varied, more dynamic, more serious, while the Forex trader even doesn’t know whether he trades inside the dealing center or came out to the world level of transactions.

    Trading Stocks

    Trading stock binary options takes some understanding of how stocks behave in order to profit from it.

    Stocks constitute one of the asset derivatives that can be traded on the binary options market. Usually, a trader will have access to trade hundreds of stocks, as brokers will list several stocks from the different stock exchanges across the world. A good spread will include stocks from the three American exchanges, the London stock exchange, and the stock exchanges from Germany, Spain, Switzerland, the Eurostoxx exchange (which contains stocks of companies in the Netherlands, Belgium, and other central European nations) as well as stocks from some selected middle East exchanges. This gives traders and unbelievable spectrum of stocks to change.

    What Factors Should you Take into Account when Trading Stocks?

    In order to trade stock binary options, traders must be conversant with the factors that cause movement in stock prices. Some of these factors are as follows:

    1) Market sentiment: if there is a gloomy market sentiment and worry about the global economy, most investors will prefer to hold cash and will sell their stock holdings, leading to a fall in stock prices.

    2) Earnings reports: A good or bad earnings report will cause a stock price to rise or fall respectively. What constitutes a good or bad earnings report? A company reporting a loss may look bad, but if the loss is less than a previous loss, this may be viewed in a positive light by investors, leading to increased demand and a rise in the price of this asset. Conversely, profits declared by a quoted company may not necessarily be viewed in good light, if the profits are less, or are viewed as an underperformance when compared with its peers for the period. The trader must have access to historical data to be able to use factors like earnings reports for stock binary options trading. Another limitation to the use of earnings in trading stock binary options is that they are seasonal and can only be used during the quarterly earnings season.

    3) Mergers and Acquisitions: A merger or an acquisition is meant to improve the standing and competitiveness of the companies in question, and usually have a positive impact for the companies involved.

    4) Government policies: these could have a positive or negative effect on stock prices. For instance, increasing import duties on raw materials for a particular industry could erode the profit margins of affected companies and negatively impact their ability to remain competitive against foreign goods. On the other hand, import duty waivers could enhance profitability of the same companies in question.

    How to Trade Stock Binary Options

    The first step is to identify in what direction the stock is likely to head after a news release affecting the share price of the company in question. From there, the trader is free to choose any binary options trade type to fit his trade profile. For instance, an earnings report can lead to a sustained response that lasts for many days. In such a situation, the trader can decide to trade the Touch/No Touch option, using an appropriate price barrier while taking into consideration any recent supports or resistance levels.

    If there is a particularly strong news release that is likely to cause the share price of a company to spike in any direction, the trader can decide to trade any of the high-yield option varieties. For instance, the sudden announcement by the CEO of JP Morgan about the trading losses recently incurred on its positions is the kind of news release that can lead to a move so hard that it could breach the price barriers of the high-yield option types. It is ultimately up to the trader to determine what kind of trade will suit the news release he wants to trade.

    Best Binary Options Brokers 2020:
    • Binarium
      Binarium

      The Best Binary Options Broker 2020!
      Perfect For Beginners and Middle-Leveled Traders!
      Free Demo Account!
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    • Binomo
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