Binary options are popular amongst forex traders.  Binary forex options offer traders limited risk as they consist of a fixed price and value (also known as the premium and payout) and offer a predetermined reward.  They also contain parameters for a target rate (also known as the barrier) and have a predetermined expiration time.

A binary option can pay the trader either the set profit or nothing when it expires, as it is an all or nothing form of trading.  If a trader pays for a call option, for example, with a specific strike price and expiration time, and the binary call option closes above the set price on expiration, the trader will receive the full predetermined profit amount no matter how far above the price the pip’s value has reached.  If the value closes below the set traded price the trader gets nothing.

Spot trading differs from binary forex trading in that it allows traders to place open ended, user defined, buy and sell orders.  The spot trades have a value per pip which can be as small as $0.01 rather than a lot size.  Your profit or loss in spot forex trading is calculated by multiplying the number of pips the trader is up or down by the value per pip.  Until the trade is closed, profit or loss in spot forex trading is constantly moving according to market fluctuations.

Both spot forex and binary options have their advantages and disadvantages. Personal preference plays a big part in deciding which of these trading methods is right for you.

Here are some factors to consider when selecting the binary trading or the spot forex  trading method.

•    Risk Management
Binary option trading allows the trader to known exactly what they stand to gain or lose with a particular trade.  On the other hand, spot forex trading does not allow a trader to ever be %100 sure of what their loss will be.

•    Flexibility and Rewards
Although high/low options are offered all the time, binary options plays are often offered only at certain times of the day or week with the strike prices set by the broker. Therefore, when a trader may wish to trade they may not have the best option available for any given day.  Spot forex, on the other hand, allows traders to enter limit orders for any price at any time when the market is open.
Binary option brokers may allow a trader to close their trades early but only after a predetermined time has lapsed.  Spot forex allows traders to close trades at any time (although with most brokers this is generally on weekdays), allowing traders some control over possible profit or loss.
Spot forex also allows traders to hold onto their selected trade as long as possible if they foresee a long trend that could maximize their profits. Binary options are limited by their predetermined expiration date and set profit.

•    Transaction Fees and costs
Binary options trading has no additional transaction costs other than whatever has already been included in the final payout with your broker.  However, spot forex includes a transaction cost that can be a commission or may be taken out in the form of a spread or both.

•    Trading Choices and Options
Whereas spot forex limits the trader to trading only in currency pairs, some binary options brokers allow their traders to dabble outside of this popular option and into a limited number of individual stocks, stock indices and commodities.

•    Surprise Volatility
The risk of surprise volatility or market reactions to global events is not usually a problem for binary option traders as the end rewards and losses are predetermined. However spot forex trading can be greatly affected by market reactions to global situations  therefore greatly affecting currency positions.

•    Trader Error
Binary options trading holds minimal margins for error because it only requires two actions – open and close. Spot forex, however, can be disastrous for a trader who may forget to place an exit or adjustment order and may result in higher losses than what the trader initially bargained for.