The majority of binary options traders are starting out completely from scratch with investing, but there is a definite crossover in interest between Forex and binary options. They are both appealing to new traders because they both offer a chance to start out with a small bankroll. Brokers profit from a spread in both cases and do not charge fees to trade (unlike stock brokers). For this reason, it is also common for traders to start out with binary options and then try Forex, or vice versa. If you have Forex experience and are trying to transition into binary options trading, what should you know?

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flags
1. Many binary options brokers are scammers (see our blacklist).

If you started out in Forex, you have been spoiled. Well, not really. You have been treated like a human being. It is not challenging to find a first class Forex broker; there are a lot of them out there. They offer demo accounts, flexible terms of service, simple withdrawal procedures, and regulated service. Many of them have been around for ages now and have really solid reputations.

Then there are binary options brokers. Few offer demo accounts, and many have incredibly complicated terms of service (especially for claiming bonuses) and withdrawal procedures that will make you dizzy. Very few of them are regulated by any kind of financial authority whatsoever. Customer service may be lacking (sometimes nonexistent), and most have been around for less than two years.

As a result, it is hard to know who to trust. There are a few gems out there—legitimate, serious binary options brokers that offer friendly terms of service, trustworthy and friendly customer service, and reasonable oversight. On our blacklist, you can view brokers to avoid, and on our recommended list, you can see the few brokers we actually do recommend. A great starting broker for virtually anyone getting in to binary options is to take a close look at MarketsWorld as they offer a totally free demo account, low minimum deposit and small trade size offerings according to this review.

2. There are brokers with demo testing accounts.

When you first start browsing around for a binary options broker, you may be shocked to find out how few overall offer demo accounts (considering that with Forex, skipping this step is almost unthinkable). The reason is that many of these companies are startups, and cannot afford to offer demo accounts to every person who wants one. There are brokers who realize their importance, however, and offer unlimited demo testing. Marketsworld probably offers the best demo account since it is entirely unlimited. You can use it as long as you want, and you do not need to make a deposit. Just as you can learn how to trade Forex without losing money, you can learn how to trade binary options without spending a cent.

3. It can be harder to control your entries and exits

One of the most challenging adjustments you will have to make is how you enter and exit trades. You can still technically use the same strategies to trade binary options that you may have used to trade Forex, but you will probably need to adjust them slightly. The reason is that you have a finite number of choices. Open up a binary options platform and have a look. You will see a certain number of trades you can select from, usually with pre-set expiry times. So you have the challenge of matching up entries you see on your charts with opportunities offered by your broker.

One way you can facilitate trading and improve your options is to trade with a broker that offers “Option Builder” (as it is called on SpotOption) or something similar. Option Builder allows you to customize the expiry time for a trade. You can pick any available asset, and then set the expiry time in hours and minutes and the amount you want to invest. That way you are not relying on the broker to just happen to offer you a smart exit.

Another feature which can help you out is called early closure, and it is offered by the majority of binary options brokers. If you select early close, you will get out of a trade before the expiry period has elapsed. This is like getting out of a Forex trade before you hit your target profit or stop loss. One thing you should know about this though is that some brokers limit the feature. They may only let you exit a winning trade for a partial win payout, or they may only let you exit a losing trade for a partial loss. Check the FAQ to find out before you sign up with a broker.

A feature called rollover is very common and allows you to extend your trade past the original expiry time. This is the equivalent of staying in a FX trade past your original target profit or stop loss. This feature may also be restricted to certain situations by your broker, so check that out as well before you decide to trade.

4. There are more ways to trade.

One exciting thing about binary options trading that Forex does not offer you is more than one way to trade. In FX, you are confined to profiting from market movement. But with binary options trading, you can profit from the relative movement of one asset vs. another (pairs trading) or even from the market sitting still (boundary or range trading). There are also more assets you can choose to trade. You can still trade currencies (a good place to start since you should be familiar with them), but you also can trade stocks, indices, and commodities.

Happily, many of the skills you have learned trading Forex will transition over to binary options trading. At their heart, they are essentially the same. For both, you need to have great money management skills, a strong strategy, and the discipline and perseverance to follow through time and again. You have a heard start in binary options if you are already knowledgeable about Forex trading. With time and hard work, you may very well become successful with both. Binary options trading is a great way to expand your trading into other assets, and can help you to profit during flat markets when your Forex trading is experiencing a lull.