How to Trade the Forex Market Using Binary Options
By Alex Cadens

It is no secret that the Forex market can be a very profitable place to be if you want to make money by trading currencies.

However, it is also no secret that achieving consistency within the Forex market requires a lot of preparation (you need education and reliable trading tools) because not only you need to have a good idea of where the price is about to move, but also how far it is going to go.

For instance if you are trading the EUR/USD pair and you decide it is a good idea to go long, you would place a “buy” order, because you are expecting the price of the Euro against the dollar to go up.

If you placed your trade using 1 mini lot (this equals $1 profit for every pip), and your target for that trade is 30 pips, you would need to have at least $1,000 in your account to meet margin requirements and allow some room for drawdown, and if the trade is successful you will make $30 in profits.

However, in order for this to happen the price of the Euro has to move 30 pips against the dollar, otherwise you will not reach the intended target and realize the profits. As you can see, if you trade the Forex market using the traditional approach you will have not only to predict where the price is going, but also how far it is going, which simply makes it twice as difficult.

Now, if you have $1,000 in a binary options trading account, what would you need in order to place a successful trade, and moreover, what kind of profits a successful trade would deliver for you?

In order to answer this question, let us assume that the price of the EUR/USD is at 1.47849 and based a given analysis of the market (e.g. swing trading pattern recognition) you think that the Euro is trending up against the Dollar.

In this case you would go long as well, but instead of placing a “buy” order for currency, you would simply buy a $100 call option for the EUR/USD pair with a 1 hour expiration. If you are right and the  price goes up, even if it is only 0.001 pip above the price you purchased your call option (which is the strike price), and it remains there or above until expiration, you would get as much as 75% return on your $100 investment.

In other words, a single $100 trade could easily deliver $75 in profits and you could repeat this process several times during the day.

But the remarkable thing here is that you did not need the price to go up 30 pips in 1 hour to get a 75% return on your investment, you only needed 0.001 points of variation to achieve this.

In this scenario you certainly had to determine in what direction the price was going to move (this is usually an ingredient of the trading process) BUT your forecast did not have to take you all the way to a 30 pips increase in the price in order for you to make get the expected return, because you got it with just 0.001 points of variation, and you made $75 instead of $30.

Also, you can open a binary options account with only $100 and you can trade with as little as $30 with no commissions charges.

So as you can see, the potential of Forex trading through binary options is huge and the process is far simpler thus increasing your chances for profitable trades, however, you do need to have a sense of where the market is going. Provided that you have this, you are likely to make take far more winning trades than losing ones and a lot more money as well.

If you are new to binary options you can Gain FREE Access to a complete trading package that will teach you how to accurately find the direction in the price of any asset, currency or index, thus enabling you to be profitable at Binary Options Trading.

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As you can see in the example above, the leverage and margin requirements are closely linked. It uses the margin to create a leverage effect, and vice versa. In the Forex, when you perform a transaction with leverage, you give what is called a guarantee or a blanket, which is the margin, the percentage is set by the broker (margin requirements), and allows you to perform a transaction whose value is much higher than your capital. Depending on the products that you deal, the frequency of your transactions and your capital, Finotec offers several ratios of effects of financial leverage – up to 200 against 1.

This means that 1000 $, you can perform a transaction valued at $ 200 000. But it is important to note that although the leverage is an effective way to increase your power and your investment gains, it also implies a risk of equal magnitude, and may result in large losses. Thus, if the market moves against the predictions of the trader, the loss of it will be much higher than they would have been without leverage. For this reason, some traders prefer to test the market with a small effect and transactions of limited size. When they see that their predictions come true and that the market moves in their favor, they rush to increase the leverage to maximize their earnings potential. Traders should never forget that the leverage is a double-edged. That is why we advise investors to start on the forex to use low leverage.

A final word about the effect of leverage. As the margin, leverage can also be used on other transactions on the forex, for instance in futures (or futures) on raw materials, CFDs and options trading, I. Consider an example. A client wants to invest $ 2 000. It may invest in the purchase of 20 shares of a $ 100 unit, but may also invest in 10 CFD contracts on securities. In this way, it controls 100 shares for the same price (thanks to the leverage effect) rather than owns only 10 shares.

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I am a Forex Trader.I love currency trading.

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