Trade currencies with binary options - trading on a margin basis

Trading binary options on currencies is becoming increasingly popular. Find out everything you need to know about this topic in our guide.

The most liquid asset class are currencies, also called Forex (Foreign Exchange Market) in jargon. Almost all brokers offer Forex for trading, since the said liquidity is always available. Accordingly, the broker almost always finds a counterpart for the trader. The characteristics of Forex trading are as follows:

  • Trading takes place 24 hours a day, 5 days a week.
  • Majors and Minors (Exotics) are traded.
  • The Trading takes place on the basis of a margin.

The following table summarizes the major currencies:

Currency pair Abbreviation Nickname Euro against US DollarsEUR / USDEuroBritish Pounds to US DollarsGBP / USDCableUS Dollars to Swiss FrancsUSD / CHFSwissyUS Dollars to Japanese YenUSD / JPYYenUS Dollars to Canadian DollarsUSD / CADLoonieAustralian Dollars to US DollarsAUD / USDAussieNew Zealand Dollars

USD1 to USD Major currencies are the most liquid currencies. Due to the globalization of the capital markets, more and more exotic species have been added in recent years. This means that private traders can now easily trade emerging currency currencies such as the Russian ruble via the forex brokers. These currencies are usually traded for the US dollar, but may also be exchanged for other liquid currencies. The following table summarizes the exotic usually offered to trade together.

pair cut Argentine PesoARSBrasilianischer RealBRLChinesischer yuan / YuanCNYDänische KroneDKKÄgyptisches PfundEGPHongkong-DollarHKDUngarischer ForintHUFIndische RupieINRSüdkoreanischer WonKRWMexikanischer PesoMXNNorwegische KroneNOKPolnischer ZlotyPLNRussischer RubelRUBSchwedische KroneSEKSingapur-DollarSGDSlowakische KroneSKKThailändischer BahtTHBTurkish LiraTRYTaiwan DollarTWDSouth African RandZAR

While not all exotics are offered among the currencies in binary options trading, this does not necessarily make sense. Many of these currencies are not as liquid as the majors. Accordingly, the spreads - i.e. the trading costs for the trader - are extremely unfavorable. Since the trading prices for binary options are already included in the investment amount and the brokers make sure that the prices are reasonably within limits, many of these currencies are not offered for trading.

For short-term trading, prices should be be as cheap as possible, so major currencies are best suited for this. Another way to trade currencies is through cross rates. Cross rates are formed when there is no official currency pair, such as the Danish krone against the Swiss franc. To form the cross rate, a detour is made via the two US dollar pairs, i.e. DKK / USD and USD / CHF, and the current DKK / CHF exchange rate is calculated from this.

Other properties of currencies

Currencies are, so to speak, the starting value for the valuation of other assets. The currency rate therefore influences the share price, bond prices and, of course, raw materials. To date, all tradable raw materials are valued in US dollars. If the US dollar rises sharply, the price of raw materials should tend to fall as global demand for it decreases. If the supply is also very broad, the raw material will fall even more, see the current development in the oil price.

Another characteristic of currencies is trading with lots. One lot corresponds to 100,000 units of the purchased currency. Of course you don't pay 1: 1, but only a certain percentage; Forex brokers leave a margin between 0.1 and 1 percent of the actual trading amount. In the case of binary options, the amount is limited to the investment of your choice. The broker automatically calculates lots in the background.

Trade currencies with binary options - trading on a margin basis

Conclusion - Currency trading can be worthwhile

There are traders who focus exclusively on currency trading. Considering that exchange rates also affect other asset classes, that's not a bad tactic, because you can often draw conclusions about the other values. The currency market is considered the most liquid market and can be traded using binary options. However, the exotic currencies are still too expensive in short-term trading, which is why they are only of limited suitability for trading with binary options.

With the broker Binary.com, exchange rates can even be easily traded on weekends.

Trade currencies with binary options - trading on a margin basis

Martin

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