Stocks, ETFs, Forex and Binary Options
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Technological developments in the last few years have presented new ways of investing and possibly becoming rich. People can invest in stocks from their home, and trade in forex anytime in the day. Likewise, there are derivatives such as Exchange Traded Funds (ETFs), and options. Binary options are perhaps the most fascinating of the derivative lot because they can be highly rewarding if the investor is astute.
Here is some analysis of different asset classes that are considered to be risky investments to help you in deciding where to park your funds.
Stocks
Traditionally, stocks were regarded as risky investments. In recent times, though, regulators have improved the functioning of equity markets, and there is more transparency in stocks investment all around. Moreover, the buyer now has more relevant information about the stocks, through technology and brokers, which can help them to take better decisions on stocks, and earn profits. There are derivatives on stocks as well. So the investor can use longs, puts, options, and also conventional trading with a stop loss to reduce any potential losses. For those who prefer lower risks, there are mutual funds. In mutual funds, there is a professional that buys or sells assets to earn profits for the investors, meaning the risk of investment gets distributed.
ETFs
Exchange traded funds are comparatively new entrants in the arena. They are good investment vehicles for beginners if the right investment strategies for ETF trading are applied. Like mutual funds, these too represent the many stocks, commodities, or other class of assets that they are composed of. The difference is that these can be sold on stock markets, and there would be no commission for managing or selling them. Effectively the asset distribution in the ETF enables a person to hold a larger portfolio of stocks or assets thereby distributing the risk.
Investments in Forex and Binary Options
Forex
Forex is perhaps the biggest beneficiary of technological developments, as people can trade in currency pairs all year round and at any time of the day. The impact of news on a currency can also be utilized in real time now thanks to new tools and software. In forex trading, speculation is made for the currency pairs if they will increase or decrease in comparison to each other. You can also trade on a margin in forex trading, which allows a trader to increase the amount of investment so that larger trades can be made in order to increase the potential profit. Trading on a margin could also increase the potential losses, of course.
Binary Options
Like forex investments, binary options can also be traded at any time of the day, with little investment. Returns from these trades could also be much higher. Basically, binary options are derivatives, i.e., they represent an underlying share and are contracts. For example, the investor buys the option for 100$ with the payout of 80% saying the price of the underlying stock will move down in a day, and if it does the agreed amount, which could be as high as 80$ would be paid to him. Effectively, within a day, the investor would have made a profit of 80$ while keeping the initial amount of 100$ as well. Because these are short term contracts, considerable expertise in predicting the movement of the underlying asset becomes necessary. Such options are available on stocks, forex, and commodities. Reading a binary options guide can shed more light on how to earn money with binary options.
Which one is better Forex or Binary Options?
Beginners always get confused in choosing between the forex trading or binary options trading. Stocks or Futures also attract new traders but they demand more capital, so an average trader finds forex and binary options the most approachable ways for trading. The decision between forex and binary options cannot be made easily as both of them are different modes of trading that can help you in the diversification of your portfolio. Forex trading is a bit more complex and variable than binary options, and you have to speculate the time to get in and get out of the trading session and also take care of the trade in the meantime. You can open a demo account and try out both of these trading types and then decide for yourself which you are more comfortable and which conforms better in achieving your investment goals.
Conclusion
Though stocks and commodities have been around for really long time, people were not always open to investing in them. Technology, however, has made day trading easier. Earning profits has become easier with tools that crunch the data and technology that facilitates real-time trading. Correspondingly, there are risks as well. It is, therefore, imperative that anybody venturing into markets for trading in forex or binary options should spend some time learning about it, rather than gambling.
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