Forex trading and digital options trading are quite different, yet remain connected in several ways. There are a number of former Forex traders who have made the move to the digital options marketplace, while others choose to participate in both forms of trading. Should you be trying to make such as decision, the following information should be helpful. When trading digital options, currency pairs are just one of four major asset classes. When trading Forex, they are the only option.
Currency pairs are the most popular asset class among those who trade digital options, and for good reason – they are extremely liquid. This fact works well for the digital options trader, but exposes the Forex trader to the possibility of large losses. This becomes quite apparent to new traders, who quickly learn just how complicated Forex trading can be. Leverage plays an important role in Forex trading. There exists the potential to generate not only enormous profits, but also enormous losses, all within a brief period of time.
The potential to earn the big bucks profits is what draws so many traders into Forex, but when you analyze the entire system it becomes obvious that most pairs can move up to a few hundred pips each day and that earnings potential can be over-embellished because of leverage. When trading binary options, your goal is to decide if the asset price is going to move above or below the entry price. If the price is higher or lower, as you predicted, when the trade expires, you earn money. This determination is best made by studying past price action and analyzing market sentiment.
Currency pairs usually make for quick and easy analysis. Currencies offer up distinct characteristics which can make the prediction process much easier. Spreads can wipe out Forex profits entirely. When partnered with a Forex broker, you’re given the option of a fixed or variable spread. When market conditions are unstable, spreads can start to expand. When this takes place, a margin call can obliterate profits. When buying or selling, the spread amount has to be paid. These costs can add up quickly. Commissions and rollover charges must also be accounted for.
A money management plan for digital options trading will be much simpler since none of these costs are included. When trading with digital options, you’ll never pay any per-trade fees or commissions. There are also no spreads to contend with, nor will there be any finance charges, such as are often a part of CFD trading and other trading forms which allow for investing with borrowed funds.
There are some clear advantages to trading currency pairs within the digital options platform. This is not to say that you should not trade Forex, some traders manage to do both quite well. However, if a simpler trading system, complete with transparency and large profit potential with minimal risk is what you are seeking, look no further than your nearest digital options platform.