Preface:

In the first part of article, general advantages and disadvantages were discussed for trading Forex using margins or binary options, In trading Forex using margins, you can make ultimate profits, you can close your trade at any time and your opened trade may be continue as your margin allow, but in other side, you may lose all of your money in one trade, your margin may change due weekends or market events and during strong news your stop loss may be hit far than the stop loss you set.

In binary options, You know your make fixed profit or lose fixed lose according to your option, Your option will finish in limited time, but in other side, after opening an option, you will not be able to maximize your profit or minimize your loss and you will not be able to close the option manually, it will be just closed after option expire.

If you want to read more, you should read the first part of article, Trading Forex using margins or binary options (1).

How to choose the right decision :

After describing both advantages and disadvantages for Trading Forex using margins or binary options, our minds should ask these important questions:
  • Should I trade Forex using margins solely ?
  • Should I traded binary options solely ?
But intelligent traders who want to benefit from anything new to improve trading, reduce risk and control physiology should ask the most important question which it:
  • Where to trade Forex using margins or binary options ? what is the time suitable for using them ?.
  • or,which is better before strong news ?.
Below different situations to be checked using the two types of trading to reach a result of which is the best trading method to use for each situation.

Situation 1 : trading strong news:

In this section, we will check different strong data, to see the initial impact immediately after the data release and then it will be easily to choose any method to use.
  • Non-Farm Employment Change (NFP):
One of the most US important data, it measured Change in the number of employed people during the previous month, excluding the farming industry, it is very influential in Forex, stocks, commodities and bonds markets. after release of data which often having surprises, US dollar either to fall or rise sharply after data, but sometimes, revision of data may cause strong up move then strong down move or the opposite.

Figure (1) initial EUR/USD impacts after NFP in different dates
Really trading Forex using margins before such a data is so dangerous, margins is very risky in this way if the data direction become against your trade, you may not be able to close the trade from the sharpness and quickness of a move, table below shows the number of pips of the first minute move after data release at 5, June:

SymbolInitial impact (first minute)
EUR/USD 173 pips down
GBP/USD 144 pips down
USD/JPY 98 Pips up

From table, it is obvious and clear that data was one direction data and we should take care from getting such a risky trade using margins because from strong fall or rise, you may not be able to close the trade, also physiology often stands against you during news, as the direction may be your favor but your fear may make you close the trade early or to close it in not appropriate time when you lose the gained profits.

so in such a data , do to use binary option is more suitable, as you make plan for your trade before really entering the market, you know your expected profit and your expected loss (good risk management plan) as you will not be able to change your stop loss, data will not wipe your account, your physiology will not be able to break your trading plan.

In the next week, the topic will expand more to check more strong news so that we can handle with them in appropriate way.if you like my last article please wait my next one, "Trading Forex using margins or binary options (3)"
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