Binary Options vs. Exchange: Which Should You Choose?
Newbies wondering how to earn online are faced with a plethora of offers. Those who choose trading are faced with the question of which is better: binary options or an exchange? In this review, we will give you an answer.
An exchange is a trading platform that brings together buyers and sellers in the financial markets. In fact, it is an intermediary whose task is to provide the technical part of the process. From a practical point of view, a trader who comes to the market to buy an asset does so through some trading platform, opening an account there through a brokerage company.
- Differences between binary options and trading.
- Similarities between binary options and trading.
How do you trade and make profit on the exchange?
- The buyer or seller monitors the price chart, analyzes it and makes a forecast.
- To determine the long-term direction of the price, for example, of a stock, it is necessary to study the issuer, its strengths and weaknesses, factors favorable to price growth or that put pressure on it.
- It is also important to carry out a technical analysis of the chart and conclude at what price it is better to buy or sell.
- The next thing that is necessary for a competent transaction on the exchange is to weigh the risks and the potential for profit. The most profitable position is the one where the potential profit outweighs the possible risk three times.
- The only thing a trader cannot predict on a stock (doesn’t matter if it’s forex or stock) is the weather.
- The amount of profit on a trade is determined by the trading strategy and the volatility of the trading instrument.
To understand how binary options differ from the exchange, we will immediately determine that this is a rate in the direction of the price for a certain time. If the trader guessed that the price after a certain period of time will be higher or lower than the initial one, then he receives on average 80% of the profit. If he guessed wrong, he loses 100% of his bet.
What is the difference between an exchange and binary options?
- In trading, profit is generated due to price changes and is measured as the difference between the opening and closing prices of a position. When trading binary options, the profit is a percentage of the bet amount. And it depends on whether it is possible to guess the direction of the price change during a certain period of time.
- time factor. When trading on the stock exchange, it is not taken into account, the profit does not depend on it. Only the direction of the price movement is important. In the case of binary options, time is important, the success or failure of the forecast depends on it. The whole difficulty is that you cannot predict the moment when you work with financial instruments.
- Expected value. Success in trading on the stock exchange depends on how competently the trader builds a trading strategy and risk management system. His task is to achieve the mathematical expectation, and this is quite realistic. With a successful trade on the exchange, a trader, on average, earns three times more than he loses on a losing one. In the case of binary options, the trader earns an average of 80%. This percentage differs from one broker to another, but it is always below 100%. And he loses the entire amount in case of an unsuccessful bet. The mathematical expectation is negative.
Similarities Between Binary Options and Exchanges
Choosing between binary options or an exchange, it is worth noting their common sides. A trader working on forex or the stock market deals with financial assets – stocks or currencies.
When working with binary options, the bet is also placed on the price of a financial asset. It is necessary to predict its direction. But due to the impossibility of knowing exactly when the prices reach the target, the trader is in a vulnerable position. It is difficult to make money without being able to control the risks. It remains to depend on luck.
The choice: binary options or trading, everyone does independently. Once you have decided on the former, you must first find a brokerage company. Browse Grand Capital binary options reviews, find a company whose specs are right for you.
Also learn the theory of how to trade binary options, consider strategies and be clearly guided by one of them.