A lot of current Forex traders are not getting the most profits possible out of their trading. There are always things that you can do to improve. One of the biggest things that is now available is using Forex binary options rather than Forex spot trading in some capacity. Spot trading is still a very valid form of trading, but it’s not always the best choice depending upon what your goals are and what the currency pairs that you trade are actually doing.
You should always be trying to become a better trader. Luckily, there are tons of resources out there that you can use and plenty of little things you can do yourself. And, it’s really easy to keep score and monitor this. Becoming a better trader will inevitably mean making more in profits. The difficulty here is that it doesn’t happen immediately. Perhaps you’ve made the changes you need to and you lose money for a few days. This isn’t a big deal, honestly. Trading has a high rate of variance because it revolves around the short term, and this can be very difficult to predict. You shouldn’t be focusing on perfection, but rather long term improvement. Measure your success at the end of every couple months, not every couple days. The variance will work itself out over time and the positive changes will reflect in a higher profit rate eventually.
Now that we know what to do, the logical question is: how do we do it? Start with the framework. Are you making all the money you can? If you just trade currencies in the spot market, you might not be. First, Forex spot trading is most profitable when there is a lot of movement. If you have 100 pips of movement, you are going to make more money than if you have 10 pips of movement, regardless of how much leverage you are using. The more the pair you are trading moves, the more money you make.
Binary options allow you to make a flat rate, and usually that rate is higher than what you would make off of a spot trade with the same asset. For example, a really good spot trade might return you 2 percent. A binary options trade will give you 85 percent. However, that’s not the only thing to consider. The spot Forex market allows you to make bigger trades than other methods do thanks to leverage. Let’s say you have 300 times leverage. If you’re investing $100, you are able to actually trade with $30,000. A 2 percent increase at $30,000 is $600. If you were to make the same trade with binaries and had a 75 percent profit rate, you would only make $75. Obviously, the first example is superior.
Not all trades will give you a 2 percent increase in your asset’s value. A lot of times, you are looking at fractions of a percent, sometimes as little as 0.1 percent. In these instances, binaries can be better. You’re still making the same $75 with them, but in the same instance as above, the traditional Forex market will only give you $30. Your analysis will not have changed at all–you will still want to use candlestick charts, fundamental analysis, and to focus on the news. It’s just a matter of measuring the potential for opportunity and then capitalizing upon it. But that’s where currency trading with binary options is so valuable: you don’t have to be right by a lot, you just have to have a single pip in your favor to reap the full profit.
There are other reasons why a mixture of these two things can be beneficial to you. Binary brokers allow you to focus on a shorter timeframe and assume less risk. You can trade in many different time increments, if you wish, down to 60 seconds with most brokers. Spot trading gives you more freedom in picking your exact entry and exit points, but this isn’t always a good thing since it is a variable left up to you. Let’s say you look at 5 minute options for the EUR/USD pair. If you are making 25 trades at $100 per day with this expiry, you could be right 20 times. That’s $1,500 in profit if you have a 75 percent return, and $500 loss, for a total of $1,000 gained. You could make the same amount with spot trading for sure, but the amount of risk you put yourself up against would be more. Let’s say there’s a 1 percent increase in the asset’s price. To get $1,000, you would need to risk $100,000. Even with leverage (which if you lose you are still responsible for), you would have to front at least $334 of your own cash, assuming you have a 300 times leverage limit. Losing that much all at once is difficult, and even though a loss is a loss, breaking it down into smaller chunks as binaries allow you to gives you the alternative of just sitting out and not risking any more if you do not wish to.
Your best choice might be to use a combination of the two types of Forex trading. This gives you the most amount of customization and allows you to maximize your profits in any situation. Ultimately, it’s up to you and your needs as a trader. Spending time looking at everything at your disposal is never a disadvantage, especially if you can turn it into a money making opportunity.