There are a number of reasons why traders new and old are turning to binary options en masse. Binaries are a relatively recent development in the world of trading. Their predecessors, digital or all or nothing options were only approved by the SEC in 2008. They have since made it to the online trading community and have changed the face of trading in only a few short years. Up until binary options made it to the Internet, online trading was a considerably more complicated affair. Online Forex trading currently has the largest share of online traders. But trading Forex has some disadvantages that Binary options negate by their very simplicity.
Firstly when trading Forex you only have access to currency pairs, this may not be a great hindrance to most traders at first but being limited to currencies alone limits the options at your disposal. Most Digital Option brokers offer trades on stocks, commodities and indices as well as currency pairs. Having these other assets to trade upon offers advantages to binary traders. This is because they can rely on correlations between assets when trading to diversify their trades. But this is the least of the advantages that binary traders have over Forex traders. The way binary options work make them a better alternative to online Forex for a number of reasons. Firstly binary options have preset risk and reward levels, meaning that traders know before placing a trade how much they can win or lose. This means binary traders have far more control of their bankrolls than do Forex traders. Binary trades only have two possible outcomes and only two possible choices a trader need make. Either the stake will earn a certain profit (somewhere between 60 and 80 percent), or most of the amount staked will be lost. And all you need to decide on is whether the asset you are trading on will rise or fall. With Forex not only do you not have this luxury but you also purchase your currency pair for slightly more than the market price, meaning it has to rise higher for your trade to be successful, but you also have to sell it at a lower price than it is actually worth, meaning you are being put at a disadvantage at exit as well at on entry.
But binary options are not only an attractive alternative to the current status quo, their simplicity makes them far more efficient trading vehicles. Binary option is particularly handy because the trade durations are about as flexible as you can get. Traders of binary options are able to select from a number of trade expirations, from just 60 seconds to the end of the year. This flexibility is far more useful in the case of shorter term positions. The ability to precisely define how long a trade lasts is invaluable as it allows you enter trades at the right moment, profit from momentary fluctuations in price action and not be tied to the fortunes of a given asset for any longer than need be. Short expirations and preset risk structures also allow you to make money when an asset swings the other way. This eliminates the need for lengthy trading sessions, meaning you can make more in a hour of intense binary trading than you can with a day long Forex trading session.
Finally with binary options gaining a wider acceptance and different broker companies being regulated, the only real advantage that Forex had, basically an increased level of respectability, is rapidly being overturned. In trading, as in all aspects of life, the better idea prevails. Binaries make more sense, for all kinds of traders, beginners and experienced ones. Forex would do well to take a leaf out of the binary options playbook. Simplicity is key.
For more information about binary options trading and other helpful tips, be sure to also visit our binary options trading guide which is dedicated to educating new brokers.