How Signals Work?
As the two newcomers on the trading scene, forex and binary options are sometimes grouped together as online trading tools. These two platforms however present many differences in their mode of operation that we need to clarify before explaining the specific distinctions between their signals.
When trading in forex, you are speculating whether the price of an asset will increase or decrease as well as the degree of the projected change. When you feel confident about your speculation, you can enter the trade by buying options and waiting for the price to reach your predicted target before exiting the trade by selling. This requires a good amount of patience. With binary options, on the other hand, things are simpler. All you have to speculate is whether the price of an asset will rise or fall; the degree of the change does not concern the binary options trader. Once you have determined the direction of the price, you can place a “call” option for upwards-moving values, or a “put” option for downwards-moving ones. At the time you place your trade you also choose an expiry time, usually ranging between a few minutes to a few hours, and wait for your trade to close. If you predicted the direction of the movement correctly, your trade finishes in-the-money. It’s as quick and simple as that.
Another major difference between forex and binary options is the degree of profits and losses. Although forex places no maximum cap on your profit, it also has no maximum limit for your losses; a trade turned sour can cost you a great amount of money which you may not be prepared to lose. Binary options, on the other hand, offered by reputable companies like Banc De Binary, offer a fixed return rate – usually between 70 and 90 percent – which you know before you place your trade, and a limited loss equal to the original amount of your trade. The limited risk inherent in trading binary options makes them much more appealing and safe to most traders.
In terms of signals that alert traders to opportunities in the forex or the binary options market, a similar pattern emerges. Forex signals notify traders of good buys to be made on an asset at a specific date and time. These signals, however, offer no closing time at which you could realize your profit; instead you need to monitor the market patiently and wait for a good closing opportunity to appear, or be alerted by another signal about a potential payoff trade. On the contrary, binary option signals alert traders to opportunities on which they can capitalize within a short period of time. With the direction of the price within a specific time frame being the only variable in binary options trading, a signal can quickly generate a profitable trade for you if the price moves in the predicted direction by your trade’s expiry.