Forex is the shortened form of Foreign Exchange. It means the process by which one currency is converted into another at the prevalent exchange rates. The rates of exchange for various currencies are ever-changing and are heavily influenced by the economic conditions of that country or the world order. Forex trading tries to capitalize on that very variation in exchange rates. The goal is to purchase currency at a certain price and sell it off for a profit when the exchange rate price goes up. It is a very simple concept but can yield huge returns for smart investors who can read socioeconomic and political trends.
Forex Trading Vs. Binary Options:
Binary options are an interesting deal for investors. The premise is that you enter into a contract with the risk and the reward being fixed to a certain amount. After that, you can select any item, such as shares, a commodity, and real estate, and then you have to bet on whether their value is going to rise or fall. If your bet is correct, you will win the specified amount, and if you lose, you’ll pay the fixed amount. Hence, Binary Options are much ‘safer’ investment options. However, in Forex Trading, there isn’t a cap to your profits. Though the risk is higher, you can still use various methods such as stop loss to mitigate the losses. Binary trading gives you only two possibilities, win or lose, but Forex Trading has a whole spectrum of results. For this reason, it depends on the person’s risk-taking preference as to which is more preferable in Forex vs. Binary Options (Forex กับBinary Options, which is the term in Thai).
Pros And Cons Of Forex:
Pros:
- Low Cost, as currency can be bought for various budgets, with minimal commissions and brokerage.
- High Liquidity, because you’re trading in liquid money anyway, which means earning can be easily encashed.
- Ease of trading, there are low barriers of entry, and many Forex indicators and guides are there to help investors.
Cons:
- High Risk because of the high leverage of trading. Though you can make huge profits, on the other hand, your losses also get magnified.
- There is a lack of transparency as no regulatory body is there to oversee Forex trading.
- High volatility is present as we have no control over larger macroeconomic factors that affect exchange rates.
By gaining the basic knowledge of Forex trading and by learning Forex pros and cons (ข้อดี ข้อเสีย Forex, term in Thai) even you can now start investing!