Key Advantages Offered By Forex Binary Options
Forex is a popularly traded market by investors but it is not without its risks. The foreign exchange markets are notorious for their volatility which can easily part an inexperienced trader from their trading capital. In short, it can be hard to make money on Forex.
You see, although it is possible to protect an open trading position by the use of a Stop loss, this only limits your losses rather than stop them completely. The stop loss provides something of a double edged sword. While it can save you from receiving a margin call from your broker it can also rob you of potential profits.
How is this? Place your stop level to close to your entry and you risk continually being stopped out of potentially profitable moves from intraday volatility. However put the stop level to far away and you risk compounding your losses and skewing your risk vs. reward.
Step forward Binary Options. These online digital contracts offer a way of trading on Forex that helps to overcome this issue and gives scant regard to market volatility. Not only will you not have to worry about placing stop levels, you will enjoy good levels of risk vs. reward on each contract.
Binary options are online digital contracts that allow you to trade Forex with known and fixed levels of risk vs. reward. You know both what you stand to profit and what your liability isbefore you even purchase the contract. Brokers set out the return you can earn for the fixed outcome when placing the contract which is your potential profit. Your risk is fixed and can be no more than the amount that you choose to wager.
The Binary Forex Advantage
In addition to offering the ability to trade with a fixed outcome, these contracts offer the Forex trader further advantages.
As opposed to trading spot Forex, you don't have to worry about setting up a level to take profits or even working out the number of pips you need to balance your risk. Instead you only need to forecast whether the currency pair will end up higher or lower from your entry price.
This simple 'all or nothing' binary outcome is from where these digital contracts get their name. Not only does this make them easy to understand, it also helps to simplify the entire strategic approach that you take to Forex.
Ultimately trading Forex through the use of Binary Options offers several advantages for both new and experienced traders. However it is the simplicity of trading and the ability to easily manage and control your risks that will likely prove to be the most attractive draw for traders.
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The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.