Binary Options vs Forex

Most binary options "brokers" are nothing more than bucket houses. It is fun, though, but you need to be accurate usually 55% or better just to break even.

HOWEVER, Nadex and IG have exchanges with binary options that are tradeable like traditional options meaning you can close them before expiration thus having the potential to have positive risk/reward ratios and positive expectancy. Nadex is FTC regulated whereas a lot of the buckets are regulated by gaming commissions.

From what's written above it seems the consensus is that binary options are a crappy deal. Like Feldrin and Mike say, you have to predict both extent and the timeframe of a move. No different from investing in a mutual funds over 5-years and hoping the basket of shares will be up at that point in the future.

As a daily trading instrument binaries are a bad idea, but there comes that day when the market is both volatile and (trending or ranging) traversing vast pip ranges... yet even then: why enter a binary option trade for 80% reward when straight-up long/short trading can turn a better profit at much less risk?

Binaries seem to limit the trader in that a binary adds constraints (up/down, more than/less than) to the already challenging statistical task of trading. There is probably a time and place when a binary option might prove useful (and profitable) such as in a hedging strategy, but whenever I have tried to employ them i have had unexpected results - either a loss or smaller than expected return.

Questioning my broker about this got reponses such as "you weren't in-the-money early enough during the day" or "oh, that was the built-in time decay that worked against you...". Asking for details about when to get "in-the-money" and what exactly the time-decay is got metaphysical and no documentation is available - from IG Markets.

So I stay away because I cannot understand the exact formula of the instrument and therefore cannot calculate my R/R for an effective trade. Easier to wait for a familiar indicator/price set-up and take 25 pips and cumulate my account.

You can make money from binary with that risk/reward but it's difficult. Only trade options longer than 1hr not this 60 second shit. As bad as it sounds you're better off doubling when out of the money if your simply trend following..

Trading Binary Options successfully depends on how well one can control the urge to trade when conditions just aren't right. I started out trading mostly 60 second binarys but ended up losing more then I was winning, and it was because I would get caught up in the emotion instead of only trading choice setups. Watching 1 minute candles come and go can get very old too when mostly they're not predictable enough to trade. One has to be very quick on the move with these! Its when I started trading 15 minute candles and up that my game started to change and I started making money. Also at that point it was easier to pick off the choice 1 minute options because the pressure to trade isnt there. I like Binary Options for the following reasons. A win can be .10 of a pip in my direction or 100, the pay is the same. An account can grow much faster then traditional forex because of this reason... as well as losing it of course. I still trade forex for the Trend, but Binarys for the time frame.
Last week I did very well for the week, then came NFP and I was counting on some trends but instead it was a tight chop chop day and I ended up losing half of my previous 4 days earnings.

Options math formula is certainly more elaborate than forex. Why 80% or 75% or 10%? It is related to math calculation, not just something pop up from nowhere.

Why forex gives profit minus commission? Again, it's related to math formula. There are always buyers and sellers. etc. etc.

So, why binary option, and maybe some other means of trades? Forex researches are almost exhausted. So, why not create something new, something more difficult and harder such as expressed in math formulas?

This things create researches, and much more jobs. Maybe it's productive, maybe not, but who cares. This is financial, not production. Financial deal with finance and money. As long as target is reach, other things can come second.

What some describe as gambling has other words in Other fields. Gamblers call it simply gambling. Mathematicians call it statistics. Businessmen call it opportunity. etc. etc. And what do forex traders call it?

As more and more researches and tools become available for binary option, it could become popular one day. We as human are sceptical with BO as a new instrument. Let's see what developments are made till the end of this year.

Good point. FX traders call it trading because it 'sounds' better in their heads than 'taking a bet'. But we're all betting on an outcome, accepting that is a key issue to moving onwards and upwards with trading. Similarly traders refer to spread betting firms as bucket shops, claiming their broker is above certain practices, yet the same traders use badly licensed, poorly capitalised offshore FX firms because the spread is 0.1 better. And some of the supposed better, more reputable brokers have been found out regarding very poor practices.

I sometimes like to trade binarys on 1 hour base or on a daily close just for the fun. As my actual brokers don't offer it I trade by bet365 which offers 83%. But I would like to trade binary more often, so I'm looking for a broker that offers more than 83% and doesnt have money limit under 1.000 Euros or equivalent.

On the discussion if it's pure gambling or not, I do think it all depends on the time frame. Anything under 1 day trade feels like it to me.

Sounds like a plot to separate the ignorant from the stupid. But frankly derivatives and thus by extension binaries is one of the very few the types of trading actually taught to MBA's and folks taking a Masters in Finance (apart of course from stock trading or more correctly fundamental analysis of Opco's). It is usually indispensable to hedging as a class of assets (derivatives) and from what I have read here could work similarly on the retail scale - however, hedging is not designed for gain - rather to manage risk.

I share the view that attempting to trade binaries for profit (i.e. pure speculation) could be complicated especially this stuff I hear about very short-term trades.

What hell the trade is binary option. If you win you earn about 80-85% of investment... but if you loose, you have lost 100% of ammount invested! This violate every rule of risk managment. I think the option is simply a bet o gamble.

in forex Binary Options have been invented to put the odds in favor of the broker.
The design is unbelievably stupid and geared towards the ignorant to separate them from their money.

trying to get info about the inner workings of binaries out of my broker is a run-around down the rabbit hole... binaries make it seem more profitable to just play red & black at roulette

I use 60 second binary options to replace a scalping strategy in periods of low volatility during the Tokyo session.

It works because a scalping strategy on most pairs during the Tokyo session become mostly unprofitable due to the spread paid.

However, in binary options, you don't pay a spread up front and thus the scalping strategy has a significantly higher win rate -- making binary options more profitable than scalping for 1-5 pips and paying the spread in normal forex trading.

The only way binary options work out for anyone is when you have an actually trading strategy that will win more than 59% of the time ie. a profitable trading strategy already.

However, if you have an hourly strategy or trend following strategy then there's actually very little reason to use binary options at all.

However, if you're scalping for micro pips in low volatility periods binary options are the only way to go.

~ fyi I don't work for a options broker

As if... widely popular? Easy to trade? This was supposed to be published on April fools day not today.

Well said frx_trader, it's a matter of perspective indeed. Every time I read about options it does my head in. Too complicated, must be the math and all the formulas.

Squeeze, spekitox, agreed

I find that forex is a safer instrument than any kinds of options mainly because of no time limitation.

and they are easy to trade??? u must be kiddin

Binary= Gambling.
these people take the other side of your trade, they're like the bucket shops in the days of Jesse Livermore. If they're still in business that means people are just losing their money to them but to stupid to realize it or just likes to gamble.

the FX equivalent of scratch cards.

Binary Options is pure derivative of gambling...

This reads like a commercial for binary options, where the author only delves through the technical differences and doesn't at all attempt to shine a light on what is needed to turn a profit in options vs. Forex.

Basically, to turn a profit on an option, you need to pick the right currency, predict the extent of the next move, and predict the duration of said move. On Forex you'd only have to pick the right currency and direction, but not the extent nor the duration of a move. If the underlying of the binary option price goes in your direction but not as fast as you predicted, you're out. If the price goes in your direction but not as high as you predicted, you're out. Essentially, unless you're really savvy at this game you'll just throw your money in a pit.

Furthermore, because reward is fixed in binary options (80% in most cases) while your loss usually amounts to the sum of the bet you're willing to make (100% loss, why do people think it's a GREAT IDEA! to risk 100% on a trade? this isn't a damn lottery), your risk/reward ratio is basically always 0.8:1, which is one hell of a crappy ratio.

If you're really knowledgeable at options trading, you're probably writing options. If a knowledgeable options buyer, I can't think of a reason why you'd want to limit your profit to 80% with a binary option rather than buying a normal option.

Edit: Oh of course it reads like a commercial for binary options trading. The post is a 'guest post' from a binary options firm. Christ. Might as well post commercials on the forex factory news front page and masquerade them as a 'news' article.

Have a look at most markets on a 30 min chart, you will often see price tag the last 30 min binary option, its like "ahh we know your there and we are going to tag the option price so you end up with nothing"

Binary is an illusion, it is certainly no easier to make money in binary unless you have a timing tool and can predict cyclict behaviour, then you migh have an edge. Binary trading sucks because you cannot build a position, and the market tends to love to range then push, so unless you can pick the right time where you get the push, binary options will take your money like a baby gives up his candy bar.

I trade binaries, but not the up/down / higher/lower style. Indeed, those are crappy inventions. I trade range binaries or touch/no touch binaries. And I tell you, if you know what you're doing, it is very profitable! ;
Study more!

It is interesting to note and trade at this point the fact that markets are primed to move about now but the Euro and Gold define diametrically opposed objectives in terms of direction. Curious because they have been in lockstep correlation very recently - very confusing stuff this trading one has to check things in a balance - add to that the funny track of the VIX also recently and you think you are making sense believing your eyes. What looked so bearish days ago looks rather bullish now at least in some significant time frames.

Good very good and fits the theory (derivatives). But it is really a different ball game. I think it is also hard ball and you need to be fairly skilled in assessing direction and timing trades to succeed (i.e. no excuses type skill) – the same thing that has many traders going belly up routinely in the Forex. But I like the sound of it. Also not sure if one can combine that trading the Forex.

I agree very much with thinking here that suggests binaries could be pretty complicated. The academics of this subject area in Finance is tough to master (interesting and exciting no doubt - but wicked).

From what I have seen I am of the opinion that the market will often come back and touch the hourly or half hourly level especially in a range, making it quite a skill to decide direction, however at some point the markets usually make their move and that is where you could make money trading binaries as an up or down option if you picked the power point for the day is a simple trade however it is quite a feat to pick the move period of the day, although it can be done. As an aside does anyone have an idea where I might find Bartels formula for validating the occurence of a cycle, ie is it statistically relevent, if any one know I would appreciate it.

I cover these in depth in my book, The Sensible Guide To Forex (Wiley, 2012)

Useful tool if have lots of confidence in the trend, because that's what you're betting on for the life of the option.

For most traders, a legit choice IF playing weekly/monthly expirations.

Unfortunately most brokers offer only daily or hourly expirations, which is either sheer gambling or pure technical trading - and few-none offer anything resembling real charting.

Remember tho, these are negative reward/risk (lose more than when you win) so need to be right most of the time. Very hard to intelligently play the very short expirations that most offer.

Binary options seams very "easy"to trade. You just have to predict which direction some asset gonna take in a period of time. However, it's not that easy to make money. Imagine that you have 85% of profit if you are right: If you bet $ 50, you make $ 40, however, if u loose, u loose eveything. If you are wrong once, you have to be right twice in a row to make $ 30 of profit (not more 40), and so on. When I saw this kind of option, I thought that it would be easy. I've trained a lot before start trading and in the theory it was ok. However, when it's real, things changed a little bit. I don't know if it's bad luck or not, but a lot of traders that I've done I was loosing it for very close values. Sometimes, the strike close value was exactly the same that I've bet. How much is the probability of this happen? I don't think that my strategy was wrong, beacause I used to compare technical analisis with other assets. Eg: If I see a downtrend of EUR/USD and a big hammer appears, it''s correct if you predict that it gonna increase. However I didn't use to bet yet. I used to compare: USD/JPY, gbp/USD, EUR/JPY, EUR/gbp, USD/CAD before betting. I just do, when I realize that USD is increasing and EUR is decreasing. Almost of times, I am right, however, we can not ignore that market oscilates and because of that I loose everything. Sometimes I used to predict that some asset gonna increase; the trade is going okay, however when it's about to close (I mean, 10 secs before closing) it goes in a vertical downtrend, closes just below 0,00002!, fucks your trend (sorry the expression) and right after close, it goes verticaly up again, as you thought that it would be. A lof of trades have been like that. How can someone realize that? I had enough!

Still prefer forex because one can close a position after an obvious change in the course of the market movements either to lock profit or to cut loss.

Also, it is easier to tell if a commodity will go up or down in price, but almost impossible to tell how long in will take and whether the price will remain pat at the price for that time period or not.

I think FOREX is more flexible and thus, better.

It is true that binary gives you more profit than traditional trading. I still find very difficult to trade in 15 minute candles. How do you trade and what is the ratio of profit? what can you advise to start as new trader?

misunderstood things can be understood

All you can do is reduce trade risk as much as possible and trade size accordingly. It either works or it doesn't. There is inherent risk in every trade. Putting the odds in my favor is my job.

It is a good presentation. Easy to understand. May not be easy to make money.

Yes as said above there are some very nice strategies with binary options, but these with fixed returns like 80% up vs down is quite bad. However, there are for instant touch options, which you can short and make very nice R/R and is somehow better than writing options. One can make range decisions and so on, but yes, most of these "binaries" are constructed in order to make a very nice R/R for a gambling business

given the payout of more than 100% and UP vs DOWN, you would be profitable just by guessing, or having a monkey trading for you. But there are binaries that offer these kinds of R/R but they wont be found at optionbrokers in malta & cyprus. But however, if one is successful with trading forex or other types of investments, why change?

Nice to know that. Happy new year.

Trading Binary Options successfully depends on how well one can control the urge to trade when conditions just aren't right. I started out trading mostly 60 second binarys but ended up losing more then I was winning, and it was because I would get caught up in the emotion instead of only trading choice setups. Watching 1 minute candles come and go can get very old too when mostly they're not predictable enough to trade. One has to be very quick on the move with these! Its when I started trading 15 minute candles and up that my game started to change and I started making money. Also at that point it was easier to pick off the choice 1 minute options because the pressure to trade isnt there. I like Binary Options for the following reasons. A win can be .10 of a pip in my direction or 100, the pay is the same. An account can grow much faster then traditional forex because of this reason... as well as losing it of course. I still trade forex for the Trend, but Binarys for the time frame.
Last week I did very well for the week, then came NFP and I was counting on some trends but instead it was a tight chop chop day and I ended up losing half of my previous 4 days earnings.

Generally the articles on forexcrunch are not too bad. They have been pushing binary options for a while now, no doubt it is because some of their advertisers offer binary options.