Many people have queries regarding the selection of Forex trading vs. option trading. Forex trade deals in the rise and fall of International currency pairs, while option trade deals in stocks and commodities.
The forex market has the advantage of good liquidity, a 24-hour trading period, and low commission. But, options trading offers high percentage returns and is less profitable.
In this article, we will decide which market is more profitable to trade in?
FX trading is a financial market where the trade of International currencies is made. It offers high profit on leverage. Trade can be made in 27 different currency pairs. The U.S dollar is the king of this trade. It has many other benefits as well. Get more information about triangle pattern forex.
In options trading, Buying and selling of stocks and commodities take place. You buy or sell stocks on the possibility of a rise or fall in the prices. Availing leverage can enhance the profit.
Now we will discuss the key differences to decide which trade is more profitable.
1. Trading Hours
Forex trade is a market that offers you to trade 24 hours a day. It works five days a week. It offers unlimited time to gain a huge profit from your investment.
There is no freedom of trading in binary options, trading 24 hours a day. Option trade starts at 9 am and end at 4 pm from Monday to Friday.
2. Time for Order Execution
In the Forex Currency Trading System, placing an order takes no time. Place your order at the best price without waiting for a suitable price to rise with no slippage.
Trading in binary options requires waiting for the best price to place your order. Moreover, your order may slip in options trading.
3. Liquidity Factor
Forex trading offers more liquidity in trade. Its trading volume reaches 6.6 trillion daily. Forex traders are filled quickly.
Options trading is less liquid than Fx trade. Options traders are not filled much quicker. Its trading volume is approximately $2 trillion per day, far less than Forex trading.
4. Commission Rates
The forex market is also called the inter-bank market. It is commission free because it quickly relates the buyers with sellers instantly. It offers a spread between the bid and the asking price.
In options trade, brokers charge high commission rates. Brokers with no reputation make scams with traders. Options trading is not a risk-free industry.
5. Leverage comparison
Forex trading is the most liquid financial market in the world. Leverage plays a pivotal role when the currency prices go up. A high amount of leverage increases the profit volume significantly.
While in options trading, profit can only be increased by managing put and call options. Binary options trading also offers leverage but to a limited extent.
Analyzing the above discussion makes it clear that Forex trading is more profitable than Option trade. It works for a longer period of 24 hours. It has less time for order execution. It is more liquid than binary options trade. Here brokers charge very low commission. The forex market offers very high leverage to gain large profits.