Options vs Forex
Trading options is a completely new experience for traders, who have been making money using Forex and a golden opportunity for those who just acquaint themselves with trading options assets. BO is a growing industry supported by hundreds of companies. But why you should learn it and adapt to the options trading? Merely because the advantages greatly outweigh the disadvantages. We will touch upon the most important ones, so you can get a clearer idea of the differences between trading options and Forex. But firstly before we compare trading options vs trading Forex, let us define the terms.
With trading Forex you are speculating on the value of certain currency, on whether it will decrease or increase in price. The more the price changes, the more you gain or loose.
Options offer an easier choice, as you are not dependent on the volume of changes, but only need to predict if the price of an asset moves up or down for a certain period of time.
Now we can switch to the main differences between trading options and trading Forex. Though the assets we can trade are similar in some cases (currencies and commodities), trading options offer a wide range of stocks and indices, like in the stock-market, but without the large investment requirement.
Options trading or Forex trading ?
Secondly, the lesser the risks, the higher the return you get. We are all humans and make mistakes from time to time. Trader errors and mistakes are indeed quite common in Forex trading, as you have to keep track of stop losses and profit margins. You can feel intimidated by the price movement and actually close your positions in advance and not gain the amount you planned to gain. Or you can misread the volatility of market and close your position with a loss, when you should have waited. But in options trading everything is preplanned and you should simply choose a direction of price movement for the time period you like, anything from 60 seconds to a few months.
Thirdly, aside from Call/Put option there is a variety of options available to maximize your profit and suit your trading style, such as Short & Long Term, One Touch, Ladder and others offered by many brokerage companies.
One more important thing is transaction costs. With options trading there are no spreads to account for if you compare it to Forex trading, and no commission costs for each trade you place. The more you save, the more you earn at the end of the day! And with protection on losses up to 15% offered by some respectable brokers, even you bad trades cannot harm your account too much, if you factor in the possibility of Rollover of a trade for a next time period, which may seem you profit.
To sum it up, the main positive feature of options vs Forex trading is the set profit/loss for each trade, as well as absence of spreads and commissions. The drawbacks are quite obvious, you are not offered the flexibility of finishing trades beforehand, when you think the price will change directions.