What is Forex and Binary Option?

Some people all over the world, are not aware of Forex and Binary Option. So, we are going to discuss forex and binary option to understand how it works and what's the difference between these two. 

To give you a simple explanation about Forex, it is known as Forex Exchange or Currency Market is a market where one currency is traded for another. It is one of the largest markets in the world.

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Some of the participants in this market are simply seeking to exchange a foreign currency for their own, like multinational corporations which must pay wages and other expenses in different nations than they sell products in. However, a large part of the market is made up of currency traders, who speculate on movements in exchange rates, much like others would speculate on movements of stock prices. Currency traders try to take advantage of even small fluctuations in exchange rates.

In the foreign exchange market, there is little or no 'inside information'. Exchange rate fluctuations are usually caused by actual monetary flows as well as anticipations on global macroeconomic conditions. Significant news is released publicly so, at least in theory, everyone in the world receives the same news at the same time.

Currencies are traded against one another.  For instance, EUR/USD is the price of the euro expressed in US dollars, as in 1 euro = 1.2045 dollar. Like any market, there is a bid/offer spread (a difference between buying price and selling price). On major currency crosses, the difference between the price at which a market maker will sell ("ask", or "offer") to a wholesale customer and the price at which the same market-maker will buy ("bid") from the same wholesale customer is minimal, usually only 1 or 2 pips. In the EUR/USD price of 1.4238, a pip would be the '8' at the end. So the bid/ask quote of EUR/USD might be 1.4238/1.4239.

This, of course, does not apply to retail customers. Most individual currency speculators will trade using a broker which will typically have a spread marked up to say 3-20 pips (so in our example 1.4237/1.4239 or 1.423/1.425). The broker will give their clients often huge amounts of margin, thereby facilitating clients spending more money on the bid/ask spread. The brokers are not regulated by the U.S. Securities and Exchange Commission (since they do not sell securities), so they are not bound by the same margin limits as stock brokerages. They do not typically charge margin interest, however since currency trades must be settled in 2 days, they will "resettle" open positions (again collecting the bid/ask spread).

Individual currency speculators can work during the day and trade in the evenings, taking advantage of the market's 24 hours long trading session.

However, Binary Options is one of the popular and controversial Trading  Instrument in the market. In fact, Binary Options has been lifted now in some European country due to continues scam activities made by some brokers and people who promote and use Binary Options to scam people. Binary Option compares to Forex is a type of option with a fixed payout in which you predict the outcome from two possible results. If your prediction is correct, you receive the agreed payout. If not, you lose your initial stake, and nothing more. It's called 'binary' because there can be only two outcomes – win or lose.

Thus, the advantages of Binary Options is the simplicity of its 'Call or Put' proposition, binary options trading is also very flexible. It gives you the ability to trade on underlying markets that include Forex, indices, commodities, and trade in all duration from 30 seconds to the end of the month. Although Binary Options is quite easy to understand compare to Forex Trading it seems that it is not suitable for everyone -it's more a risk form of trading.