Forex vs Binary options – 1. Basics
FOREX |
BINARY OPTIONS |
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What’s available for trading? | Currencies, traded in pairs: EUR/USD, GBP/USD, EUR/CHF, GBP/JPY, AUD/USD and many other. | You can trade currencies as well as variety of other instruments: stocks, indices, commodities etc. |
How to trade? | You trade by finding a trend and then buying or selling a currency pair. (For example: if you believe that EUR/USD pair is going to rise, because your market analysis shows that EUR is getting stronger comparing to USD, you’ll be looking to Buy EUR/USD with the expectation that the trend will go up and you make profits). |
You trade by placing bets. You place bets for the currency (or any other instrument) to be above or below the current price level within a certain time limit. (For example: you can bet that the price for EUR/USD will be above 1.3000 in 15 minutes time. You then wait 15 minutes, and if you’re right – you win, if you’re wrong – you lose.) |
How to make money? | The currency pair must eventually trend (move) in your direction. (E.g. if you placed a Buy order for EUR/USD: in order for you to profit EUR/USD must go up. If you placed a Sell order for EUR/USD: in order for you to profit EUR/USD must go down). |
The currency pair (or other instrument) must reach the targeted price or surpass it AND it should happen within the time limit of your bet. |
How to lose money? | The currency pair must move against you. (E.g. if you bought EUR/USD, in order for you to lose EUR/USD must go down. If you sold EUR/USD, in order for you to lose, EUR/USD must go up). |
The currency pair (or other instrument) must either not reach the targeted price OR fail to do so withing the required time limit OR both. |
What’s required to hold a trade? | You must have enough capital on your account at all times. That is because when a trend temporarily moves against you, you should be able to keep your trade running without interruptions by showing enough capital in your account to offset temporary dips. | Nothing else. As soon as you entered a trade there is no additional requirements for maintaining a sufficient capital. |
How long can you hold to a trade? | As long as you want to. | Your trade closes when your Bet expires. You will choose the time of expiration in advance: from 1 minute, 15 minutes, 1 hour, 1 day to 1 week. |
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