I had a customer once asked me that which type of trading is more profitable or has more profit chances, whether it’s binary options or forex? I guess a lot of you may have the same question and struggles in picking a particular one to focus on, and so today I will try to help you to decide based on few basic check points.
How deep is your pocket?
First up, one of the most realistic question you have to ask yourself, how deep is your pocket? How much allowance do you have for investing in trading? Simply speaking, if you are thinking to invest $100 a month, then binary options is going to be your only choice because forex trading comes with margin call which you need significant balance in your account to keep your trades running for profit taking. Therefore, it is suggest that you should not have less than $500 in your account for all time. Your allowance for trading is the first thing that determine whether you are a forex trader or binary options trader.
How much are you aiming to make?
Now let’s say you have over $500 allowance and you are still thinking whether to trade in forex or binary options, then you need to ask yourself how much are you aiming to make in a single trade? Most binary options platform has maximum invest amount for a single trade and comes with fixed payout. This is good for risk management but at the same time it limits the amount of profit you going to make in a single trade. On the other hand, in forex trading, ideally as long as the market keep goes to your favored direction, your profit grows without a limit.
How much risk can you take?
Risk is another thing that you need to consider when choosing between the two types of trading. As mentioned above binary options trading always comes with a fixed payout, and it also comes with a fixed loss. This will ultimately help you to manage your account better as you know how much you are going to profit or lose before you even placing the trade. In binary options the maximum loss amount is exactly how much you invest. On the other hand in forex trading, profit is unlimited and so does loss, which beginner can blow their account with a single trade if they do not understand how stop loss works. That explains the greater return comes with greater risk. Understand the risk in each product before deciding on which one you are going to trade.
I can surely say that forex is more profitable if your pocket is deep enough and if you have certain level of knowledge in forex market.
However, both of these types of trading are similar and applies the same methodology, and they both have their own pros and cons. To decide which one to go after is ultimately depending on your own situation.
In general, I would recommend beginner traders to start with binary options as it requires small invest amount and risk management is easier, as well it can be a good way to learn and understand the foreign exchange market. Though if you are an experienced trader and your pocket is deep enough, forex may be your choice for making real cash.