A massive growth area in the world of Forex trading is the use of and provision of Options markets, and in particular FX Binary Options. With this growth has seen a large number of new FX Binary Options Brokers emerge, whilst some of the embedded, traditional Forex brokers also offer Options and Binary Options accounts.
What Should I Consider When Choosing a Binary Options Broker?
Choosing the best binary options broker is a matter of deciding which broker features you as a trader need. The services offered by the many FX Binary Options Brokers differ significantly and in this section we evaluate brokers based on various criteria including:
- Types of options and services offered
- Minimum deposit and trade sizes
- Price spreads
- Customer support
Binary Options Brokers
Binary Options, What Are They?
Binary means “relating to, consisting of or involving two parts or things”.
Binary Options are a form of trading that is simplified by having to decide if the value (or price) of an asset is going to rise or fall, over a specified period of time.
Simply put, the trader has to choose between 2 investment possibilities:
- If the trader believe that the price of the asset is going to rise, then the trader would enter into a “Call” option.
- If the trader believe that the price of the asset is going to fall, then the trader would enter into a “Put” option.
So the first choice for the trader is which asset class to look at.
Then, the decision is over which time frame are we expecting the asset to either rise or fall in price.
Then, the trader decides whether the price is going to increase or decrease, in that set time frame.
What Are The Advantages of Trading Binary Options?
There are numerous benefits of trading Binary Options, but here are the highlights:
- Ease of trading – As outlined above, the decisions that need to be made are relatively simple compared to regular trading; which market, which direction and over which time frame!
- The risk is fixed – The trader can only lose the amount risked on the trade.
- The reward is known – The profit on the trade is defined before entering the trade.
- Different asset classes – As outlined below, many different markets are available to trade.
What Assets / Markets Can I Trade With Binary Options?
Although the significant growth in Binary Options trading in the retail sector has primarily been seen in the world of FX, many of the new Binary Options Brokers also offer other asset classes.
- Indices: S&P 500, Dow Jones Industrial Average, FTSO 100, Nikkei.
- Individual stocks: Mostly the large cap, popular stocks; Facebook, Apple, Google.
- Commodities: Oil and Gold are the most popular.
- And of course FX: Many Brokers offer Cross Rates (EURGBP, AUDJPY), as well as the Major currencies versus the USD (USDJPY, EURUSD etc.).