Trading Options and Forex Trading: Understanding the Difference

Trading Options and Forex Trading: Understanding the Difference

August 30, 2017

When you search on the internet Trading Options vs Forex Trading, you will find a lot of sources on comparing Options Trading Vs Forex Trading. Here we want to rewrite and censure them. Table of Contents1 Forex and Options Trading Have Become Very Popular During Last Three Years!2 Trading Comparison Forex and Options Trading3 Which One […]

When you search on the internet Trading Options vs Forex Trading, you will find a lot of sources on comparing Options Trading Vs Forex Trading. Here we want to rewrite and censure them.

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

This sentence is written in a lot of articles. It’s clear that when you offer a new and unique system for earning or losing money, Many people will be eager to test it. Some of them will leave it and some of them will continue because Forex Trading Options is a new term and sometimes looks like gambling. It is obvious that a new system will attract a lot of people. But we should consider the fact that whether they will stay in Forex Trading Options or they will leave it and come back to traditional Forex trading?

To answer this question, we should know that which one is riskier and which one is better for investing not for fun! It is clear that Forex Trading Options is riskier than normal Forex trading. Thus, the serious investors will sustain normal Forex trading but sometimes they may trade on  Options Trading too because it is new and more appealing. Yet how about newcomers?

It is hard to respond this inquiry: what will happen if a new person faces with Forex Trading Options and normal Forex trading without any knowledge? Which one will attract him?

We believe it totally depends on the brokers’ advertisements. In our view, that Forex Trading Options is more attractive for beginners because it is manageable and more exciting. Anyhow, maybe spot Forex trading attract them in the future.

Trading Comparison Forex and Options Trading

  • When you are trading on an Options Trading, you are forced to wait until expiry time. Sometimes you are for profit but at the last second, you will lose! Yet in Spot Forex trading, you can close your position whenever you aspire.
  •  On normal 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 have not 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 Trading Options.

In some sources we  have: “You can never get a margin call on Forex Trading Options!” and ” There are no spreads, rollover/swap or commissions while trading Options.”

Which One Is More Profitable, Trading Options vs 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 don’t use stop-loss, you will see a margin call. 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 badly!

Second, it is very interesting if you think that on an Options Trading you will not spend spread! Then how the broker will earn money? For example, when you call a 1-minute order, you can win 80% profit. However, when you lose you will lose 100%, means that your spread is 20%! And you can’t win in Options Trading according to your chance trading.

It is hard to answer this question. Some sources claim that Forex Trading Options Trading is more profitable. If you are a good scalper, Forex Trading Options is the best choices for you but Spot Forex Trading is more profitable for long-term traders.

Best Times To Trade Options

We believe that Forex Trading Options will develop more and more and it will be a good rival for Spot Forex Trading. 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 Options.

Risk or Reward Ratio: Trading Options vs Forex trading

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

Loss of Risk on Each Trading in  Trading Options

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

Risk

Profit Percent on Each Trading

When you open an Options trade, you will receive a specified profit percent. If market goes only 1 pip through your position, your profit on spot trading depends on market movement. Sometimes you will win a lot and sometimes you will win a few amount of money. The reason is that we can’t usually see huge market movements. Sometime market movement is against our position. Thus, Options trading is a winner on our competition of Trading Options vs Forex trading.

Spot Forex Trading

Spot Forex Trading

Trading Flexibility in Trading Options

You are able to send stop orders, limit orders and set a lot of indicators on spot Forex trading. So 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 Trading Options we have not these options. Maybe in 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 profitability. On Trading Options we have not leverage because we are not trading. In fact in Options Trading we bet on market’s direction that here both are equal.

Facility in Options Trading Platform

Trading on Options is like a game. Although trading on 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 just 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:

Trading Options and Forex Trading: Understanding the Difference • CloseOption Official Blog