Binary Forex Trading
Trading Forex With No Spread? It Must Be Binary!
Given the choice between trading currencies with a pip spread and a high leverage compared to predicting the outcome of a currency pair at the mid-rate based over a specified period of time, traders are choosing the latter. Binary Options, after a long ramp up period, are now becoming the traders’ choice for online trading.
In a nutshell, Binary Options give traders the ability to predict if the mid-price of a stock, currency pair, commodity or index will go up or down in a pre-determined space of time. The ultimate example which demonstrates the simplicity of such a transaction is done using the price of EUR/USD. At the time of writing this article, this currency pair was trading around 1.28975. Within a binary options platform, the trader is presented with a chart showing the trend over time for EUR/USD. Additionally, being aware of market news also gives the trader an edge to the educated prediction. If the trader decides that EUR/USD will go up, a trade is executed when the trader selects ‘call’ (up) or ‘put’ (down), the amount of the trade and the expiry time. When the expiry time is reached, and the trader’s prediction is correct, the payout is between 65% and 88% depending on the length of the expiry time. If the trader had selected ‘call’ for EUR/USD and the price went up by just ONE pip to 1.28976, the trader is ‘in the money’.
After approximately three years of being available for online retail use, Binary Options have become a popular tool for many new and experienced traders. As with all financial instruments there is a certain element of risk attached to trading binary options, but if the trader is careful, educated and trades wisely, the returns can certainly be worth the risk.
The number of Binary brokers, based on the rise in demand, has also grown dramatically over the past 12 months. In a question and answer session with Peter James, CEO of Magnum Options, when asked what has attributed to the growth in the Binary industry James replied, “I believe it’s a combination of elements.” James continued “the first is the amount of effective marketing that has been carried out over the past three years. Three years ago, prospective traders would enter Binary platforms without a clue what Binary Options were. Now, 90% of leads coming into the platform are already fully aware of the product. The second element is the speed of trades. We live in a society where people want instant rewards. Conventional trading has never offered this. But now, with the design and concept of Binary trading the quick profit element is very appealing. The final element is the lack of pip spread. Former Forex traders can place the same trades as with online Forex platforms and receive similar leverage. The only difference is that there is no pip spread to beat in order to start making a profit. For many Forex traders, this is simply a no-brainer.
But why does Magnum Options think they can enter the market and compete with the existing and established brands? “Right now it’s all about branding, market share and offering trading clients above and beyond. From the service given at signup through to the trading experience and then onto the withdrawal process, we not only compete but we exceed the standard set in all of these benchmarks.”
Where do you see the Binary Options industry heading in terms of regulation? “There definitely needs to be regulation. However, up until now the only regulation was with CySec. After recent events in the Cypriot economy, I’m not so sure if CySec is the right body to turn to for regulation. We at Magnum Options are currently exploring all possibilities for regulation.”