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Forex Binary Options Trading
The attraction of Forex binary options trading is that with careful analysis and attention to the market one can earn multiples of the value of the binary options contract. With handsome profits as an incentive how do binary options work and how does a binary option compare with a standard Forex option? For that matter how does an options trader learn about trading currencies?
The Promise of Forex Binary Options Trading
In trading binary options a trader buys a contract in which he or she will earn $100 if for example the EUR/USD pair closes above a given figure on a given date. If this does not happen he or she loses the price of the binary options contract. As with regular options trading the idea is to find a currency pair for which this sort of option is cheap, let us say $5. And the idea is to find a currency pair with this sort of pricing that your analysis tells you is likely to close in the money. If you make this sort of trade in regular options trading you might make a few dollars but in Forex binary options trading you might make $100 on every $5 invested.
How Does This Compare to Regular Forex Options?
First of all the primary use of regular Forex options is to contain currency risk in international transactions. These traders confine themselves to the currencies involved in the upcoming transaction. Speculators comb the market for volatility using various options trading strategies in search of profits. Profits are related to the accuracy of analysis and timeliness of trades. Forex binary options trading relies on the same sorts of analysis but benefits from the all or none leverage when the trader does it right.
The worldwide foreign exchange market has three main centers, London, New York and Tokyo. Thus there is a market open virtually twenty-four hours a day on all business days. Currencies are traded in the trillions of dollars. In fact, eighty-five percent of all trades involve the United States dollar, the USD. Other major currencies include the Euro, British pound, Swiss franc, Japanese Yen, Australian dollar and Canadian dollar. Other currencies trade in smaller quantities than the majors and commonly trade only against the US dollar. In order to profit from trading currencies, including Forex binary options trading, a trader needs to analyze...