In this article we are going to look a little closer at FX based binary options and what you should think about before you start trading FX based binary options. FX based binary options are binary options that are based on assets on the FX Market. The FX or FOREX market is the worlds largest market. The international currency market (FX market) sees trade worth more than 1 trillion dollar each and every day.
The FX market was earlier only open to banks and large financial institutions but is today open to private individuals who can trade on the FX market using a FOREX broker. Most FOREX brokers allow you to use CFD:s and other leveraged financial instrument to make or lose a lot of money. FX based binary options can either be traded for profit or to hedge leveraged positions on the FX market. You can read an example of this can work here. In this article we are going to focus on trading FX based binary options for profit.
All FX based binary options are based on different currency pairs. It is the difference in exchange rate between the two currencies in the currency pair that decides if your option matures in money or not.
FX based binary options tend to be the most popular type of binary options in most brokers.
You can simulate FX based trading below:
Choosing a broker
Most brokers offer a large amount of currency based binary options. This is in large part due to how popular they are. It is also due to the fact that the currency market is very volatile and suitable for super short binary options. Currencies moves in very small increments which means that they always move up and down in value. This makes them a lot more volatile than other assets that move in larger increments. The value of currency pairs changes several times a second.
The fact that most binary options brokers offer a wide variety of different currency based options does not mean that it doesn’t matter which broker you chose. Some brokers put a lot more focus on currency pairs than other brokers do. Some brokers only offer options on a low number of currency pairs while others offer options based on a a lot higher number of different currency pairs. Some brokers even offer options based on Bitcoin and other cryptocurrencies.
If you want to trade with the most popular currency pairs such as USD/ GBP, USD/EUR or EUR/GPB then you can chose almost any broker. If you want a larger selection of different currency pairs to trade with then it is important that you research different brokers to chose one that offer options based on a large selection of different currency pairs.
Look for a binary options broker that gives you a large chance to earn money. A broker that offer a large selection of options you want to trade with and that gives you a high return if your options mature in the money. Ignore the bonus while choosing which broker to register with.
Please note that the suggestions below are based on my experience and my opinions. Other traders might get different results and prefer other strategies.
The currency market is as earlier mentioned very volatile. It is often possible to see long term trends (months) as well as short term technical signals for the coming seconds/minutes. To predict where the currency is going to be in a day or two can however be a lot harder since the market is very complex and since a large amount of different unknown factors will affect the market in that time. I therefore recommend that you only trade short and super short FX based binary options. I recommend that you use technical analysis to find signals to trade on. I personal prefer to only trade on strong signals with a high success-rate but you can also perform more trades with weaker signals to achieve the same result as long as your success-rate is high enough for the trades to be profitable.
I recommend that you use the demo account to trade until you have developed a technical analysis technique that allows you to produce signals of a high enough quality for you to make money over time. Signals that have a success-rate that is high enough to be profitable.
You will have to be an active trader who spend a lot of time analyzing the market if you want to make money trading currency based binary options.
Who should chose FX based binary options
Currency based binary options are most suitable for active traders who are willing to devote a lot of time to analyze the market and trade binary options. The currency markets are very complex and effected by both macro and micro factors. It can therefore be very hard to predict the movements on the currency market if you are unable to devote a lot of time to it. I do not recommend that more passive traders trade with currency based binary options. If you are a passive trader who wants to make some extra money on the side of your regular job then I recommend that you look at stock based options instead.
If you are an active trader and skilled at technical analyzes then you can make a lot of money on the currency market.