Binary Options seem to have taken the investment market by storm. More and more investors are now moving into binary options trading and taking advantage of a fixed high-yield return over traditional Forex profits. In Forex trading, profits are typically dependent on risk appetite and the ability of a trader to properly analyse trends as well as catching reversals at the top or bottom. Binary options, on the other hand, offer as much as 80% profit from just a pips move in the right direction. Even US regulatory agencies, the SEC and the CFTC, have legalized Binary Options by offering exchange traded Binary Options through regulated brokers.
However, traditional investors and day traders are still apprehensive about the implications of Binary Options trading on the overall health of the economy. Many old-school traders still consider Binary Options to be a form of gambling, as the “all or nothing” nature of Binary Options trading is akin to betting on the roulette table. According to a recent survey from the Bank For International Settlements, the daily turnover in the Forex market is valued at $5.3 trillion, and has seen more than a 33% jump from the previous estimates in 2011. Such high volume of trading, is supported by both institutional traders as well as individual traders who still consider Forex trading to be the benchmark for all investments.
The Evolution Of Binary Options & Forex Trading
Binary Options offer the simplicity of predicting price movement over a very short amount of time, which is fast, easy, and convenient for short-term investors. Nowadays, investors are looking for considerable profits within a very short span of time. Unlike traditional investors, modern day investors are not looking for huge gains over extended periods of time, but are more oriented towards making maximum returns within the shortest duration. This is one of the main reasons Binary Options trading has exploded into the public domain, irrespective of whether the average investor makes or loses money in Binary Options.
Binary Options also offer the excitement of on-the-edge trading, which used to be a prominent feature of Forex trading. However, modern day Forex traders have become more cautious, and Forex no longer offers the kind of excitement that Binary Options does. Another reason for its success is that Binary Options don’t require an investor to be sat at a computer terminal for hours on end, looking at charts and decoding patterns. Most Binary Options trades are over within seconds, minutes, or hours at the most. Mobile trading has also enabled investors to trade Binary Options from virtually any location, without the need to access large monitors or other supporting devices.
Consequently, more countries are beginning to adopt Binary Options as a valid financial trading platform, and are putting forward regulations to control brokers in the industry. This has helped investors to carefully select brokers who act in their best interests, and ones who can guarantee the safety of their client funds.
As far as returns and potential gains are concerned, Forex trading is still at the top of the pile. Because it offers unlimited earning potential capped only by the ability of a trader to read market conditions accurately. Most Forex brokers offer investors the opportunity to start trading in the market with a large amount of capital, which further increases the earning potential. Binary Options, on the other hand, cannot guarantee unlimited income, as the initial investment capital is pegged at $5,000 or $10,000 per trade. Of course, an investor can invest millions of dollars with a Binary Options Broker, but the revenue per trade has a maximum cap of 80% of the investment amount, with the potential to lose the entire investment in the event of a losing trading.
Seasoned and disciplined traders might also find Forex trading offers more freedom and better returns in the long run, due to the amount of control that Forex traders enjoy. Binary Options traders cannot expect to get out of losing trades like regular Forex traders. And can only extend the expiry period of contracts by increasing the investment. This may negatively affect the outcome of trades, especially for losing trades that can have the potential to lead to huge losses. However, Binary Options can be traded with a set amount of capital loss per trade. Unlike Forex trading, where the losses can exceed the initial capital, if a trader receives a margin call due to high leverage or extreme volatility.
Compliance And Regulation For Both Binary Options And Forex Trading
Although several countries are at the forefront of regulating financial markets around the world, there is still a huge amount of uncertainty relating to the future, for both Binary Options as well as Forex trading. Although US regulatory agencies are opening up to the concept of Binary Options after their initial reticence, they are still in the early stages when it comes to opening up the full potential of Binary Options to the US public. Several regulatory authorities also control the way the financial markets work, and are implementing new laws that work towards limiting the amount of freedom a trader can enjoy.
In the US, even Forex traders are restricted in their approach to trading on the foreign currency market. They have to suffer regulations that hinder high leverage and hedging options. Although regulatory agencies amend laws to safeguard consumer interests, curtailing the freedom of trading might have a negative effect on how individual investors perceive the financial markets. Individual investors have a huge impact on how the global economy works, and it will be interesting to see how the Governments of leading nations work towards creating a transparent and liquid marketplace.
So, Is Binary Options Trading Here To Stay?
Binary Options could be considered more than just a passing fad, as investors are lining up to make consistent returns through small investments, without hurting their overall investment portfolio. Binary Options brokers are venturing into new areas of social trading, which enables a new generation of young traders to take advantage of the Binary Options market. Therefore, Binary Options is an industry that is certainly looking to make the most of its popularity for years to come.
On the other hand, Forex trading is also growing at a phenomenal rate. Growth of 33%, over a 5 year period, is substantial proof of how individual traders can play a significant part in shaping the global economy. Forex trading still offers a lot of benefits over Binary Options trading when it comes to overall control and freedom to regulate investments, which attracts investors with a higher investment capital.