Options Trading and Forex Trading: Understanding the Differences

Options Trading and Forex Trading: Understanding the Differences

August 30, 2017

Table of Contents1 Forex and Options Trading Have Became Very Popular During Last Three Years!2 The Comparison between Forex Trading and Options Trading3 Which One Is More Profitable,Options Trading or Forex Trading?4 Risk or Reward Ratio: Trading Options vs. Forex trading5 Risk of Loss on Each pipe in Trading Options6 Trading Flexibility in Options Trading7 Margin […]

Forex and Options Trading Have Became Very Popular During Last Three Years!

This sentence is written in many articles. It’s clear that when you offer a new and unique system for business. Many people like to test it . Some of them may leave it, and some of them may continue because Options Trading is a new market and sometimes may look like gambling. A new system attracts many people. But we should consider the fact that whether they stay in Options Trading or they leave it, and come back to traditional Forex trading

To answer this question, we should know which one is riskier and which one is better for investing, not for fun! Options Trading is riskier than Forex Trading. Thus, the investors who are experienced in Forex trading may sometimes trade on Options Trading too, because it is new and more appealing. Yet how about newcomers?

We believe it depends on the brokers’ advertisements. In our view, that Forex Trading is more attractive for beginners because it is manageable and less risky. But it is noticeable that the Options Trading market is more exciting, and it is attractive who loves risk.

The Comparison between Forex Trading and Options Trading

  • When you trade on Options, you must wait until expiry time. Sometimes you are in profit, but at the last second, you may lose! Yet in Spot Forex trading, you can close your position whenever you aspire.
  •  On Forex trading, you can trail your order in profit. You are also able to modify your stop-loss or make a profit, but in Forex Trading Options, you do not have these options.
  • Your profit in spot Forex trading depends on market movement. However, in Options Trading, it’s fixed, then you are not worried about huge losses during Forex news or market gaps.
  • In Forex Trading, you can send different order types like buy stop, sell limit, buy limit, and sell stop. Therefore, you can set the expiry time for your orders with stop-loss and make profits. However, these options are not available on Options Trading.

Which One Is More Profitable,Options Trading or Forex Trading?

Options trading vs Forex trading

Options trading vs. Forex trading
First, we should say when you are trading in spot Forex Trading, you are using stop-loss, but when you do not use stop-loss, you see a margin call. A margin call means you lose all your money because of your fault. If you look more wisely, you can realize that both Forex Trading and Trading Options can wash out your money if you trade poorly!
Second, it is wrong that if you think about Options Trading, you do not pay spread! Then how the broker earns money? For example, when you call a one minute order, you can win 80% profit. However, when you lose, you technically lose 100% of your money, in a similar situation, your spread is %20!
It is hard to answer this question. Some sources claim that Forex Trading is more profitable than Options Trading. If you are an excellent scalper, Options Trading is the best choice for you, but Spot Forex Trading is more profitable for long-term traders

Best Time To Trade Options

We believe that Options Trading will be developed more and more, and it will be a good rival for Spot Forex Trading soon. Today we can find auto trading strategy robots for Trading Options, too. Then, we should wait to see a new and surprising idea on Forex Trading.

Risk or Reward Ratio: Trading Options vs. Forex trading

In Options Trading, your risk/reward ratio includes fix percentage, but in spot Forex trading, you are able to change it. It seems that spot Forex trading surpasses than Options trading for risk/reward ratio well. In this case, spot Forex trading is the winner.

Risk of Loss on Each pipe in Trading Options

In spot Forex trading, you are dubious about your real loss amount. Maybe, you stop-loss because of market slippage, but in Options Trading, your maximum risk of loss fixed amount. Here Trading Options trading is the winner.

Risk

Trading Flexibility in Options Trading

You can send stop orders, limit orders, and set many indicators on spot Forex trading. Meta trader allows you to use expert advisers for automatic trading. You can modify your orders on spot trading and close your position partially. But in Options Trading, we have not these options. Maybe in the future, some brokers add these features. However, at the moment, spot Forex trading is more flexible in comparison with Options trading.

https://www.closeoption.com/blog/trading-options-and-forex-trading-understanding-the-difference/#trading-flexibility-in-trading-options

Margin and Profitability in Trading Options

Spot Forex trading and also Forex brokers give you high leverage like 1:1000 to increase your profit. On Trading Options, we have not to leverage because we are not trading. In fact, in Options Trading, we bet on the market’s direction that here both are equal.

The facility in Options Trading Platform

Trading on Options is like a game, Although, trading on the spot market is different and more difficult to some extent, for beginners or inexperienced traders. Trading Options are easier to understand and trade.
A beginner trader has to understand one strategy and some basics, like risk management. He can also take advantage of a Free Training Class to be ready for trading.
We hope this article has helped you to find the best answer to the comparison ( Options Trading vs. Forex trading).

It is highly recommended to read more about  Options trading and Forex Trading

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  1. Signe J. Petersen Monday 11 September 2017 11:36
    Signe J. Petersen

    Trading options can be highly profitable – if you know what you are doing. In our Options trading guide, we explain how to trade Options and make money. In detail, you will learn: