Table of contents:
- 1 How does foreign exchange trading work?
- 1.1 Which broker is offering Forex Binary Options?
- 1.2 1. Pick a good Broker
- 1.3 2. Choose a currency Pair
- 1.4 3. Do a chart analysis
- 1.5 4. place the trade
- 1.6 Opportunities and risks of currency options
- 1.7 What should you look out for in currency options as binary options?
- 1.8 Conclusion on trading with currency options (binary options)
Binary Options not only allow you to trade stocks and indices but also to speculate on the development of exchange rates and commodities. Trading with foreign exchange as the underlying asset is considered particularly difficult because there is hardly any other commodity – except commodities – where it is so difficult to estimate how prices will develop in the next few days, hours, or even minutes.
The reason is, among other things, that in Forex trading, as the foreign exchange trading is often also called, often not necessarily the fundamental data is the reason for the price development, but there are also many speculators who are active in the foreign exchange market.
If you would like to trade with foreign exchange, then you can do this, for example, directly through the Forex broker or alternatively speculate with currency options. In both cases, it is very important that you at least know the basics of foreign exchange trading and know which aspects to pay attention to.
The most traded currencies with Binary Options:
How does foreign exchange trading work?
Before you decide to trade forex options, for example in the form of Binary Options, you should first understand how forex trading works in general. If you want to trade foreign currencies (forex), always trade one currency against another currency. This is because an exchange rate naturally always consists of the value of two currencies in relation to each other, for example, the US dollar against the Swiss franc or the euro.
If, for example, you think that the US dollar is currently undervalued against the euro, you could speculate that the dollar would appreciate against the euro, i.e. the exchange rate would rise. In that case, you would have to speculate on the euro-dollar pair by buying the dollar while selling the euro. In this example, you would simply buy a call currency option on the dollar and then profit from rising dollar rates.
- 2 currencies belong to one currency pair
- Trade 2 currencies against each other
- The exchange rate is the so-called price of this asset
- The foreign exchange market works 24/5
Which broker is offering Forex Binary Options?
Trading forex with Binary Options is very popular among traders. From my experience, every Binary Options Broker gives you the chance to use currency pairs as an underlying asset.
It is important to use a trusted broker who does not cheat on clients. On the internet, you will find a lot of stories from traders which lost all their funds by scam websites.
In the next list, you will find 3 Binary Options Brokers that offer currency trading with a high yield. They are regulated and payout all profits very quickly. The platforms are recommended for any type of trader. In addition, there are a lot of tools to analyze the forex market in order to make a profit. Try a free demo account:
How to trade Forex with Binary Options:
1. Pick a good Broker
Pick a Binary Options Broker from the list above. Register your account for free. It is also possible to use a demo account with the virtual funds to test the platform. The minimum deposits are very low like $ 10. It is possible to start trading with any amounts of money.
2. Choose a currency Pair
After you registered your account you have to choose a currency pair to trade. There are often more than 30 different pairs to trade. The most traded pairs got the highest yield. In my opinion, you should trade the currency pairs with the highest yield to get the most profit and limit the risk.
3. Do a chart analysis
To generate trading ideas you can do an analysis of the chart or fundamental data. The platforms offer you a lot of different tools. Use indicators, drawing tools, or chart types to find a good entry point for your trade.
4. place the trade
Now you have to place your trade on rising or falling prices. You can choose the expiry time of the trade and the investment amount. With one click it is possible to open the trade. After you placed the trade, wait for the result. You can earn a high yield or lose your investment amount.
Opportunities and risks of currency options
Especially the professional traders very often decide to use currency options, i.e. foreign currencies as the underlying of the Binary Options, also in the area of Binary Options. One main reason is certainly the relatively large fluctuations that the foreign exchange market can sometimes experience in a very short time. As a result, you can achieve high profits within a relatively short period of time, especially when trading forex.
From the point of view of an investor who wants to achieve a high return in a short period of time, trading in Binary Options with the underlying instrument foreign exchange is therefore very attractive. As is the case with all options, the opportunity for high profits is matched by the risk of the investment, which is by no means negligible. If the exchange rate you are currently speculating on moves in the wrong direction, larger losses can quickly become possible. Even a total loss cannot be excluded from currency options.
What should you look out for in currency options as binary options?
The main point to bear in mind when trading currency options in the form of Binary Options is that you should know much more about the currency in question than would be the case, for example, with trading index options. This is because the exchange rate can also be affected by news that may not have anything to do with currencies. In addition, strategies play a very important role in Binary Options with currencies as underlying instruments.
Furthermore, you should always look at technical analysis, because how a currency rate moves often depend on the current charting situation. Very popular in the area of binary options with a currency as their underlying is the use of the trend following strategy. This means that you always choose the option direction (i.e. call or put) that most other investors choose. You then follow the current trend.
Otherwise, trading in Binary Options in the area of foreign exchange is based on the same factors as is the case with classic currency options. You first decide on an underlying asset, i.e. a currency pair, and also on the direction that the price should take. If you take the currency pair dollar and euro as an example, you can use Binary Options to speculate on the one hand that the value of the dollar will rise (against the euro). On the other hand, you can also “bet” that the value of the dollar will fall.
Tips and tricks:
- Chart analysis and technical analysis work good with currency options
- Read the news
- Check out the economic news calendar
- Now the facts about the currencies you trade
Conclusion on trading with currency options (binary options)
Trading in currency options is also used in the segment of the Binary Options mainly by already very experienced traders. Since the foreign exchange market is a relatively volatile market, where there can be relatively large price fluctuations in a short period of time, trading binary options are particularly risky for beginners. In addition, quite extensive research is important, as well as the use of strategies, if you want to trade Binary Forex Options successfully.
Check out my other articles about Binary Options:
- 15 Rules for Binay Options – Tips & Tricks
- 5 best Binary Options Broker 2020 – Review & Comparison
- Are Binary Options a gamble?
- Are Binary Options a scam?
- Are Binary Options Robots a Scam? – Honest review
- Best Binary Options App – Comparison & Review
- Binary Option Markets
- Binary Options – Call and Put
- Binary Options – Range Options – Boundary Options
- Binary Options – Touch Options
- Binary Options 60 seconds Trading Strategy & Tips
- Binary Options Bollinger Bands Strategy
- Binary Options commodities trading
- Binary Options demo account – Recommended For Beginners
- Binary Options Money Management Strategy
- Binary Options News Trading
- Binary Options regulation – Why is it important?
- Binary Options review – Critic and warning
- Binary Options RSI Strategy
- Binary Options trend following strategy
- Binary Options volatility strategy
- Binary Options vs. CFD Trading – Which one is better?
- Binary Options vs. classic options
- Binary Options vs. Forex Trading – Which one is better?
- Chart analysis for Binary Options
- Forex Trading with Binary Options
- Hedging Binary Options: Can You Hedge Against Losses?
- How risky are binary options?
- How to avoid Binary Options Scam Brokers
- How to trade Binary Options – Trading Tutorial
- How to Trade Stocks with Binary Options – Tutorial
- Is Binary Options Trading safe? – Consumer protection
- Learn to read Binary Options Candle Sticks
- Trade Binary Options with MetaTrader
- Trade Pivot Points with Binary Options
- Warning about Binary Options – A form of betting
- What are Binary Options?
- Why Binary Options Signals are a scam