What are Forex and binary options? All important aspects

Forex and binary options seem a complicated subject, it is very common that you do not know its characteristics, especially if you are starting.

Therefore, we want to make it simpler for you by explaining in a very easy way everything related to this topic. Then, when you invest as a trader or create a broker, you will be well informed, you will be able to use the best options and build a profitable portfolio.

Know Smart Broker Solutions, your technology provider in binary options and Forex. Become an expert, don’t be misinformed. Our recommendations will guide you and will open your options in this exciting world of risks and at the same time of huge profits.

Forex and Binary Options

Investing in Forex is not the same as investing in binary options, they have similarities, but each has its characteristics. Let’s review them one by one, and then you can draw your conclusions.

Binary options, what are they?

Binary options are a high-risk investment method in which you place your money on commodities, underlying assets (e.g., currencies), or indices to match the rise or fall of that asset. As the name suggests, you have two options: you win, or you lose.

How are binary options classified?

Among what differentiates binary options and Forex, certain elements characterize each one, such as:

According to the expiration time

  • Binary options High – Low: refers to the prediction of the behavior of assets, i.e., whether they will have an upward or downward closing price.
  • Binary options (Call – Put) or 60 seconds: is a binary option in which you must make your forecast in only 60 seconds; you must be very fast and have done a previous study.
  • Limit and Range Options: this form of investment refers to whether the asset will remain within the range established by the trader in the stipulated time.

Most used options

There is the option “asset-or-nothing” in which you acquire an asset and if your investment is close to the projection of the amount that will have that investment, whether it is above or below, you will have the benefit of it in a physical form or, in the opposite case, you get nothing.

In the case of the “cash-or-nothing” option, the investment is made by calculating what could be the amount of the asset in which you have invested. You would have two options, either it could become higher or stay at the price or it could be lower or stay at the price, all this in a given time.

For both cases, asset or nothing and cash or nothing, if the prediction remains in the range you stipulated, then the transaction ends “In – the – Money” receiving a percentage of the money or physical asset as the case may be. If the final value is not within your parameter, then your binary option is “Out-the-Money” and therefore you receive nothing.

It is becoming more and more common for Forex binary options brokers to give a minimum percentage of the invested amount if the transaction ends “Out-the-Money.”

Elements that define binary options

路 Underlying assets

It is any type of good for which the prediction is made. These underlying can be currencies, commodities, indices, stocks, etc.

路 Expiration

It refers to the day on which the binary transaction takes place. These have a short term that can take 1 minute, 15 minutes, and up to 24 hours; in Forex there are other terms.

路 Movement of the underlying acquired

It is the type of variation concerning the cost that the asset will have, this determines whether you should use a put or sale option or a call or purchase option.

路 Profitability

It is the return that you will have depending on whether the prediction you have made is correct. It is between 70% and 80%.

路 Exercise amount

It is the price that the trader estimates that a specific asset will have at the moment of the closing of the stock market activity.

Forex Market

Unlike binary options, Forex has the particularity that its bids are executed immediately, so the trader pays the exact amount of the asset to be acquired according to the market at the time of the transaction.

Another difference is that it is operated through market studies and the assets in which the capital will be invested, controlling the risk and deciding the moment in which the trader will close the operation, as opposed to the term that binary options have.

Some brokers choose to operate under Forex Licenses, others, on the other hand, have discovered that not everything is so clear-cut in this financial world and have opted to learn all about Forex licenses before obtaining one.

Among other differences is the risk we take. Although in any stock transaction there will always be risks, in Forex the risk is lower, since we will be investing in stocks that usually have a less volatile movement than investing by projecting the behavior of an underlying asset. If your projection fails you lose all the invested capital.

As you can see, Forex binary options have their nuances, some trade on their own, others through brokers, and some prefer White Label Solutions, especially if they are starting out and need to have the security provided by a technology provider such as Smart Broker Solutions.

Final recommendations

Remember that binary options and Forex are not the same, you must take into account how to invest and the conditions offered by each market.

Whether binary options or Forex, in Smart Broker Solutions we have a team dedicated to providing you with the best options, and whether you start your Start-Up in Forex or decide to invest in binary options, you will have a professional guide with more than ten years in the market. Contact us and take off in the financial market.

Rodrigo Insua

Avatar of Rodrigo Insua

Head of Marketing en Smartbrokersolutions. Coordination and management of online and offline marketing campaigns.

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