Risk comes from not knowing what you’re doing.
– Warren Buffett
First of all, I’m going to kill the myth. You should have a realistic view of trading life, especially with online trading. It’s not some glamorous life filled with champagne, hookers and cocaine. Don’t get me wrong, what you do with your profits is up to you, but chances are that you are not Bud Fox, or Jordan Belfort, going after big scores, against all odds in a quick burn high risk:high reward strategy. If you’re anything like me, you enjoy these extreme characters and the entertainment that these movies bring you, but you want a realistic way to make money in the long term.
Trading is unlike gambling or games of chance. If you gamble on the markets with no strategy, you will lose, almost every time. You’re here at TraderAsset and you’ve clicked on “Education”, so you’re obviously intelligent, curious, too smart to gamble, and you want to earn some serious cash with online trading. So how do you win? How do you get the big house, the supercars and life that you’ve always dreamt of?
The answer is simple: Education & Practice
No, I am not talking about you going to community college and hitting the books for years. I want you to know how to quickly gain the knowledge about what moves markets, and understand which tools are available to help you profit now.
Then pick a broker that offers a FREE demo account from those we’ve reviewed and approved, and open a trading account.
Top 3 Forex Demo Accounts
Top 3 Binary Options Demo Accounts
Once you have registered at one (or more) of these brokers, don’t make any deposits just yet. A good broker will have an agent call you to discuss your requirements. Talk to this representative and tell them you want a demo account and ask them what their trader training programs are. All of the above brokers will offer you a free demo account. Some brokers may request a deposit to be made, which is refundable anyway. Either way, the demo account will allow you to “Paper Trade” (or practice trade), risk free. Some brokers may offer you a personal account manager to work with you on a one-on-one training program. You may be required to deposit a certain amount for this service, but this is an invaluable resource & if you can afford it, we recommend it highly. Think about it, you will have your own personal coach helping you research and execute trades. Some brokers may offer you access to a library of training videos and articles with or without the account manager service. Accept all of this, and learn. You won’t regret it.
As a consumer and a new trader, you’re not powerless. Quite the opposite. You have the power to ask for everything the broker can give you, to help prep you in your trading career. It is in their best interests to nurture and help you get used to their platform and services, so don’t fear: ask (or you won’t get).
Our recommended brokers usually have great mobile apps and mobile sites. Technology has come a long way and you can now execute trades almost 24/7 and from your own home or mobile phone. This doesn’t mean you should trade at all hours. As a smart trader/investor you should plan and execute your trades in a pragmatic, routinely manner using a trading calendar or fundamental news/releases. You should then plan and execute three to five trades a week, but only after extensive research using technical and fundamental analysis, and with a savvy money management strategy.
As with anything long term, you will start small, (maybe a scalping strategy), to get you used to the trading environment. You can then build on this foundation until you gain enough experience and trading confidence over time. Stay committed and who knows, you may be one of those rare few playing with $100k to millions per trade!
In Brief: Binary Options VS Forex
Let us analyze both these options in accordance with different factors.
When it comes to asset choices, binary options offers a larger selection than Forex. Binary options traders can trade with stocks, indices, commodities, currency pairs and even some other specialised assets. As a contract based trading format, some brokers are very creative and offer a huge variety of underlying assets. You will be restricted to trading currency pairs with Forex trading. If you are looking for a variety of assets and an easy way to into trading stocks, binary options may suit you. If you are interested in trading currencies, why not try both Forex and Binary Options?
Profits and Losses
Binary option excels with providing transparency of profits and losses. A binary trader knows the profit/loss when making a trade. In Forex trading, both profits and losses can be estimated by placing limit and stop orders. You are able to place trades without using any safeguards in Forex, therefore it is riskier than binary options trading.
Order Types/Trading Instruments
This is where Forex trading wins comprehensively over binary options trading as Forex offers a number of advanced order types (Market, Limit, Take Profit, Stop Loss, Trailing Stop etc). Binary options is normally limited to variable on approximately three order types (Call/Put or High/Low, Range/Boundary Options, Touch/No Touch Options). Have a look at the trading instruments that your broker offers. You may be surprised at how varied they are!
Maximum Trade Amount
Forex trading used to be a better option if you wanted to place larger value trades, and many brokers we recommend accept single investment amounts of up $100k+. The binary option industry has matured somewhat in the past five years, and many brokers are regulated and safeguard trader funds, allowing you to trade similar maximums. Once again, check with your broker on their minimum and maximum trading amounts.
Binary option trading will save you from all of these costs as your investment is the total risk. If you execute a winning trade, you win your investment plus the pre-agreed percentage of profit. If you lose, you lose your invested amount. There is no additional cost with trading binary options online. The cost of Forex trading is calculated by understanding Swaps, Rollovers, Spreads and Commissions. You should consider these costs because they add to your overall trading and transactional costs, and therefore your profits.
All financial trading carries a high level of risk. If you don’t know what you are doing, you run the risk of losing your investment. With Forex, fluctuations in prices can cause aggressive downturns within seconds. In binary trading, you will not have to worry about fluctuations in the market as much, (unless you are trading with range options). Instead, your contract tends to be set to expire at a certain point (60 seconds, 5 minutes or even a month), and it is more important that you finish within the correct range at that point. The correct way to trade is to have a proper risk management strategy in both, and understand which specialist strategies your broker offers you. For example, some binary options brokers offer a contract buyout option at a lower rate than the originally invested amount, whilst the contract is still in play. Learn and use these tools to safeguard your investments.