Hello and welcome to this week’s interview with the experts. We’re here in Banc De Binary’s Limassol office with analyst and broker Harry Jeferson.
Interviewer (Sarah Fenwick): How is Binary Options trading different from traditional Forex?
Harry: Well to begin with binary options are a lot simpler to trade, very user friendly and reach out to the smallest trader, sitting at home with as little as $500 to trade with. With binary options you are able to make profits without having to go through many different types of analytical information before placing a trade. Then comes the reward factor. Binary options offer a 70-90% reward depending on what you are trading with. So when you open a transaction on a currency pair, all you need is one pip above or below the opening price at expiration in order to make a 70-90% return. With Forex in order to make such a high return the markets have to move dramatically in order to reach those kinds of targets. Now why the figure ranges from 70-90%? Simply because different currency pairs offer different rewards, and different expirations on a particular currency pair also give you a different reward. The other very useful thing for daily traders is that with binary options the risk/reward ratio is always pre-calculated so you know before the trade how much you can possibly make or lose. Whereas with Forex if you open a position without placing a take profit or a stop loss order then that position could wipe out your entire account, without you being able to stop this if you’re not in front of your computer. With binary options you have an expiration so you can only lose a certain amount. The other very important thing is that there is no spread in the binary options market. Simply speaking, the buying and the selling price is divided by two so you get one price, either by buying or selling the price is the same, whereas with Forex in order to make a profit you have to overcome the 2-3 pip spread and then start making a profit.
Interviewer: I think a lot of people are curious as to how the relationship works between the Euro and the Dollar.
Harry: The Euro and the Dollar are the most competing currency pairs of the market, simply because they come from the two biggest markets in the world, the European and the American market, now depending on what kind of news we have from either market this will affect the performance of the currency pair. So if the GDP recording in the U.S is slightly lower than the previous GDP recording then that will affect the Dollar and obviously will push the Euro up or vice versa. If the Euro zone is not performing very well, as it now, then obviously the Dollar can take advantage of the weakness in the Euro and will rise against it.
Interviewer: Do binary option traders trade on news or on results from economic data?
Harry: At Banc De Binary we have 5 different platforms to accommodate both news traders and long term traders, so we have the 60 second platform on the binary options digital platform, where you can go on short-term trades that range from 60 seconds to the end-of-day, and then we have the binary meta platform which is very similar to MT4, which is a Forex platform, where you can trade on expirations up to 4-5 months. So we do cover a broad area of the market.
Interviewer: Let’s take a specific example. Say the U.K releases lower than expected GDP figures, so in other words their economy has slowed down, how does that affect the pound against the Dollar?
Harry: That would obviously have a negative effect on the sterling in comparison to the Dollar. GDP is the most important indicator of economic performance. So a GDP reading in any country will have a direct effect on its currency. There is a wealth of analytical material on our website so you can perform technical analysis and try to take a view on where the market is going to move in the future, combining it with fundamental news like that of the GDP.
Interviewer: When are currency markets open?
Harry: Currency markets are open 24 hours a day, 5 days a week.
Interviewer: How does a trader make a decision on which way a currency will go, how do they use analysis in more depth?
Harry: There are two ways, one is technical analysis and the other is fundamental analysis. Technical analysis is using technical indicators to analyse charts that show you readings of the past, and to try and make a prediction on where the market is going to move by using indicators like the Relative Strength Index or Fibonacci, or Moving Average Convergence Divergence. Then you can combine that with fundamental analysis which is the news we watch daily; wars breaking out, or oil companies having leaks, or natural disasters like we’ve had latterly in the U.S with hurricane Sandy. If you combine the two and trade in a disciplined manner, then you should do well. If you sit in front of a platform and just trade for the sake of it, it won’t happen for you, you have to be disciplined and trade with logic.
Interviewer: How do you answer the debate or the controversy around binary options being gambling?
Harry: I utterly disagree, gambling is entirely to do with luck. Now trading binary options, whether it be currency pairs or stock trading has absolutely nothing to do with luck, it has to do with analysing the markets and trying to predict future movement, taking advantage of information by investing in any of the different transferable financial instruments we have in the market.
Interviewer: And we go back to the fact that binary options do have underlying assets linked to the trades.
Interviewer: Like currencies moving according to the economic performance of a country.
Harry: Yes it has nothing to do with luck, it has to do with knowledge and research and analysis, you can’t compare it to gambling, they’re two different things.
Interviewer: Thank you very much.
Harry: Thank you.
George Milios is the founder of onlineforextrading.net, the binary options and forex news portal which is dedicated to providing you with all the information you need to successfully trade.