Due to the persistent low interest rate phase, the importance of classic investments, in which a profit was made by interest, continues to decrease and investors look around for new alternatives. The many customers are also willing to take a significantly higher risk than with the previously popular investments. An interesting way to invest free capital profitably is online trading with Forex products or binary options. In the following article, we explain whether these types of investments are really suitable for beginners and whether they should better choose Forex or binary options.
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Both forms of investment are highly speculative
Unfortunately, there are still many beginners who ultimately start trading Forex or binary options under false assumptions act clearly about their circumstances and often get into serious financial difficulties.
Both in binary options and when trading Forex products, traders should invest only free capital. This is money that is not planned for other purposes, neither to cover current costs, nor for later investments or for retirement provision. Losing this money should be planned in, because forex trading or binary options can both lead to a total loss of the deposit.
Be sure to deposit only as much as you financially can handle without any problems. The minimum deposits at brokers are sometimes very different. It is advisable to look for a broker with a low minimum deposit and to invest little. To get to know trading in Forex or binary options and try yourself, no investment is necessary, because many brokers offer free demo accounts for both variants . These are already loaded with play money, so that users can try out trading under real conditions but completely without risk.
If you do after testing with the demo account should decide to open a real money account, you should first conduct a broker comparison, because the numerous providers sometimes offer very different conditions so that by making the right choice you can save costs, increase your profits and also maximize security.
Binary options trading is easier to learn
Binary options were developed to simplify the common Forex and CFD products to make it easier for beginners to get started. They are less complex than classic forex trading and can therefore be understood quickly by even completely inexperienced customers. Therefore, the binary options are very popular with beginners, but unfortunately the risk and the particularly high variance are often neglected.
Binary options can be Just act, but that does not mean that it is easy to be successful in the long term with them. Because these are bets that either win or lose everything, winnings and losses are subject to extremely high fluctuations. If you do not deal with solid risk management here, sooner or later you will lose everything. Even the best traders face a big risk of losing their entire bet when trading binary options. Therefore, only money should be used that is not needed and whose loss does not lead to financial problems for the trader. There is also a high risk of loss for CFDs, but this is slightly lower than for binary options.
Many professional traders have a reason the simple structure started with binary options and some of them were traded with great success. Nevertheless, most professionals switch to Forex or other trading products in the course of their trading careers, as these offer significantly more options, which reduces the luck factor and good traders theirs Increase profit.
Forex Vs Binary Options in 2018: What is more profitable?
In Forex trading, there is often an obligation to make additional payments
Both binary options and trading in currency pairs are highly speculative financial transactions, where high losses and even the loss of entire trading capital can be expected at any time. Binary options generally have the advantage that here there is no obligation to make additional payments. This means that the customer can lose a maximum of the amount that is in his trading account. Forex trading, on the other hand, typically is traded with a lever. The trader can move a multiple of the money in his trading account. For a trade, only a relatively small security deposit (margin) has to be deposited. With a leverage of 1: 400, this amounts to just 0.25% of the amount actually traded. If this margin is used up, a margin call is normally made and the trade is automatically closed if there is no immediate deposit from the customer.
Usually this is enough to prevent that more money is lost than is in the trader's trading account. With extremely volatile rates it can happen that the trade cannot be closed in time and there is a loss, which the account balance of the Traders significantly exceeds. In this case, the customer is obliged to compensate for the negative account balance of the trading account by making a deposit from his private assets. Most recently, in January 2015, there were high losses among many traders who, due to the obligation to make additional payments , had to partially register for personal bankruptcy. The Swiss National Bank removed the peg of the Swiss franc, whereupon the CHF suddenly rose sharply. In order to avoid such unexpected and existential losses, beginners in particular are strongly advised to always use the Stop Loss Order on Forex.
on binary Options on the other hand, there is usually no obligation to make additional payments, because this is not a leveraged product. The trader can therefore lose a maximum of his bet. Whoever consistently pays in only as much as can do without without problems, is thus protected with binary options against existential losses.
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Particularly easy to get started with social trading
A relatively recent trend in online trading is so-called social trading. Here, not every customer acts alone, but especially successful traders enable other traders to copy their trading strategy in real time. If the so-called signal generator places a trade, this is also done automatically from the account of the follower, so that exactly the same order submissions take place. As a reward for making his strategy available to other users, the signal generator receives either a commission per follower or a profit sharing. So he can earn extra money. The advantage for beginners is that they can already successfully act without extensive knowledge of course analysis and other important basics. The risk still lies with every trader himself, the signaling agent assumes no responsibility for possible losses of his followers.
In social trading, users can almost do learn a lot about trade, because the signaling devices are usually available for discussions and explain their decisions in detail if necessary. So it is possible to become yourself from a follower to a successful signal generator.
Social trading is now offered by many forex brokers, so that interested traders have many options here and can choose the offer that best suits their individual needs. With binary options, on the other hand, social trading is not yet very widespread and so far only possible with a few providers. However, it can be expected that the number of brokers offering this service will increase in the near future.
Both products should only be traded with good risk management
There is a significantly higher risk both with binary options and when speculating on the exchange rates than with traditional interest-bearing investments or when trading stocks. The binary options vs forex discussion may differ, because it cannot be said clearly which product is more suitable for beginners. Here, each customer has to weigh up which advantages he would like to secure and which disadvantages he does not want to accept under any circumstances. However, it applies to both trading variants that they can only be traded profitably in the long term with good risk management. Since the high variance in both types of trading can sometimes lead to high losses, only a small part of the available total credit should be used at any given time. The less credit is available, the lower the stakes may be. If the trader continuously makes, he can adjust the stakes accordingly with increasing capital.
Although there is no one hundred percent protection against a total loss of entire deposit, but with the appropriate strategies the risk for this can be significantly reduced.
Binary options or Forex are not suitable for all investors. Only those who actually have the money they need and could live with a total loss should venture into trading one of the two products. On the other hand, neither forex trading nor binary options are suitable for a sustainable and secure investment. In order to invest capital profitably and yet keep the risk of high losses as low as possible, other forms of investment such as shares or fixed deposits are significantly more suitable. Trying at all costs on speculative financial products can lead to major financial problems or a significant reduction in living standards. Before registering with an online broker, customers should therefore inquire again whether the selected investment form is really suitable for them due to their financial situation, or whether there are clearly better alternatives.
Our conclusion: Both forms of investment have their advantages and disadvantages
When comparing forex trading and binary options there are many similarities, but also significant differences, Here each customer has to decide for himself which properties of the two products are most important to him. The similarities and differences are listed again in the list below at a glance.
Regardless of which of the two products you choose: Be sure to be aware that this is the case highly speculative investments and a complete loss of the deposited money is possible at any time. Many Forex brokers may even face the feared margin requirement. Therefore, only speculate with money that you can spare without problems. Before you register with an online broker for forex trading or binary options, you should read the general terms and conditions completely and make sure that it is a reputable broker and no doubtful conditions are placed on the customer.
Only with a reputable online broker regulated by a reliable authority can trading with Forex or binary options succeed.
Binary options difference Forex: An overview
- With binary options there is generally no obligation to make additional payments.
- Binary options are simpler than forex Trading
- While binary options are simple bets with an "all or nothing" character, the profit in Forex trading depends on the level of the price fluctuations.
- Forex trading offers a larger selection of order functions, with which the conditions for a T let rade be specified
The similarities of forex trading and binary options
- Both products are traded over the counter
- Most brokers work according to the market maker model
- They are highly speculative investments where high profits are possible, but there are also high losses
- Both products can also be traded via social trading
- Customers should ensure that the broker is regulated by an official and reliable authority.
- Bonus campaigns promise additional credits
- With a free demo account, the trading functions can be tested with play money
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