When trading the Euro using a Forex platform, you are either purchasing or selling the Euro currency since its value is based off other currencies. You do your trading with the intention of later re-selling or repurchasing in order to gain a profit on the difference accumulated. The process of exchanging the one currency for another currency is known as the cross exchange.
When trading the Euro with a Binary Option platform, you are only concerned with forecasting which direction the Euro moves in comparison with the other currency it is paired. With Binary Options traders are not concerned so much with the value of any of the foreign currencies, because they are only concerned with being able to speculate the market’s future direction considering fundamental and technical conditions. Binary Option traders don’t have to worry about the value and differences of each currency, just whether the difference in the values increases or decreases.
Currency Trading in Forex
When you are trading a certain currency using a Forex broker, you are actually involved in cross exchange, which is the rate at which the currency of one
country is exchanged for the currency of another.
For instance, let’s consider the EUR/USD currency pair which is one of the most commonly traded currency pairs in the markets. When we explore the EUR/USD currency pair, the first currency, the EUR, is the “base” currency and the second currency, the USD, is the “counter” currency. The counter currency is also referred to as the quote currency. There is a value for each of the currencies separately and when paired. The value is simply referred to as the currency pair value, which shows the base currency’s value when compared to the counter currency.
The currency exchange rate for each currency fluctuates depending upon economic and geopolitical situations happening within and outside of their respective nations. A tremendous number of factors need to be considered when deciding whether to “buy a currency” or “sell a currency” depending on how the markets behave and what effects they’ll have on the economies.
In Forex trading situations, the EUR/USD rate will identify the number of US dollars that one Euro is able to purchase (How many USD can you buy with 1 EUR). If you think the value of the Euro will increase when compared to the USD, you would buy EUR with USD. In cases where the exchange rate increases, you will be selling the Euros and you will be making profits.
Currency Trading in Binary Option
When you are involved in trading the EUR/USD currency pair in Binary Options (broker reviews) you will be taking advantage of the price movement of these two currencies by generating revenue even when currencies only move in the slightest of margins, because Binary Options traders receive maximum payouts on each trade that lands ‘In the Money’.
In a Binary Option trade you need to forecast whether the price movement of the EUR will be up or down with respect to the USD. To do this, you will need to research what the current rates are, as well as figure out the daily/weekly/monthly trends which influence the rates of the currencies.
After some careful analysis and investigation of the situation you should be able to make an educated prediction and speculate for yourself whether the price of the EUR will go up or down in a set time period. If the price of the EUR rises in accordance to your predication that the asset would gain by the expiration time, then the option you exercised would be a success. You would then multiply your investment amount by the amount agreed upon between you and the Binary Option on their trading platform to determine your profit.