Many new binary options traders use to ask the question what’s the difference between this form of online investing and forex trading. There are a very large number of differences between these two investing types. Understanding these is necessary in order to learn to trade binary options.

However, all the differences between this from of online investing and stock (or forex or CFD trading) come actually to the advantage of binary options investing. If you read this page below, you’ll know all the differences between binary options and spread betting.




Difference Between Binary Options and Traditional Trading

There are many differences between this from of investing on financial assets and traditional investing such as forex and stock trading. The differences lie in aspects such as how assets are handled, risk factor, profitability, difficulty to learn and long-term sustainability. Read the paragraphs below to learn about all these differences.

Handling of Assets

One of the major differences between binary options and forex trading is the fact that in binary options you’ll be betting on the movement of an asset while in traditional trading you’re required to buy assets and then sell them later when their price has increased.

In binary options, you’ll only have to predict if the value of an asset will increase or decrease during a certain time frame. If you’ll manage to make a correct prediction, then you’ll be rewarded with a very large amount of money.

In normal forex or stocks trading you’ll have to buy a certain quality of assets and then sell them later when their prices are higher in order to make profits. As such, traditional trading is a bit more complicated when it comes to handling assets.

Risk Factor

Some people claim that this form of online investing is riskier than traditional investing. In our opinion this is exactly the other way around. In this version of online investing you’ll always know in advance how much you can win and how much you can lose. This is always displayed in advance of purchasing a contract.

Each time you invest an X sum of money on a binary contract, you’ll know that in case you’ll make a wrong prediction you’ll lose that sum. In regular investing however you can lose a very a large amount of money in case the value of an asset drops really low.

In regular trading, your winnings and losses depend on how much the value of an asset has increased or decreased. If the value of asset increased a lot and you sell, then you’ll win a large sum; however, if the value of an asset decreases considerably then you’ll lose a substantial amount. –In both cases, you can’t tell in advance how much you’ll win or lose.

In binary trading, you’ll always know how much you can win or lose in advance. There won’t be any negative surprises in case the value of an asset plummets.

Profitability

The difference between binary options and stock trading or forex investing is very small when it comes to profitability. Both investing types are extremely profitable if traders have the discipline enough to learn the basics and then use advanced online investing strategy.

This variant of investing, however can be much more profitable because it’s based on payout rates. What this means is that each time you make an accurate prediction, you’ll receive your initial investment back plus a certain percentage of that investment.

In case you invest, say, $100 you can win as much as $400. In regular investing you’ll be lucky to have a profit rate of around 10%-20% meaning that you have to generate profits though volume, as in the purchasing and selling of a very large number of assets.

Time Required to Generate Profits

One of the most significant differences between binary options and forex or stock investing is the fact that in this type of investing you only need a very short time frame to generate money. The usual duration of a binary contract is between a few minutes to a few hours.

This means that in a few minutes or a few hours you can generate substantial income if you correctly predict the movement of certain assets. However, in normal stock trading you’ll usually have to wait a very long time until the value of an asset increases high enough for you to be able to sell.

Let’s say you buy some stocks of Microsoft today; it might take multiple days or even weeks until the value of this stock increase with even just 5%. Only then you’re able to sell and generate profits. You could have made that money in the matter of a few minutes in binary trading.

Likewise, binary options investing does not require you to trade in large volumes due to the high payout percentages. The income you can generate with an investment of $100 in this from of investing you could perhaps only generate with an investment of $1,000 or multiple smaller investments of $100 in regular trading.

You can only compensate the low profitability of standard forex and stock trading with either the placing of very large investments or the placing of multiple smaller investments. No matter how we look at it, binary options are definitely able to generate profits considerably faster than traditional investong.

Difficulty to Master

Another difference between forex trading (and stock trading) and binary options is regarding the way you can master these trading types. This variant of investing is really simple. All you have to do is to correctly predict the movement of an asset. There are only two outcomes, which are that the value of the chosen asset increases or decreases.

If you correctly predict that the value of an asset with either increase or decrease during a certain time frame, you’ll win a large sum of money. This is all. Now you can already begin to trade binary options. Its mechanism is really this simple.

However, traditional trading is much more complicated. In traditional investing not only will you have to predict the movement of an asset, you’ll also have to predict the size of the movement otherwise you won’t be making any profits at all.

If you buy 100 stocks of Microsoft and the value of those stocks only increased 1% during the next two weeks then you won’t be making almost any money at all. However, in this investing type you’ll only have to predict the movement of the asset. So, if you predicted that Microsoft’s stocks would increase, then you would have won even if that increase was only 1%… or 0.1% or 0.001%.

So, all in all, we believe that binary options trading is both easier to master and offers higher rewards than traditional trading. If you’re interested in learning how to trade binary options online, then read our additional educational articles. These will teach you how to successfully trade binary options and generate consistent profits all the time.