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What is a Forex

The foreign exchange market (forex or FX for short) is one of the most exciting, fast-paced markets around. Until recently, forex trading in the currency market had been the domain of large financial institutions, corporations, central banks, hedge funds and extremely wealthy individuals. The emergence of the internet has changed all of this, and now it is possible for average investors to buy and sell currencieseasily with the click of a mouse through online brokerage accounts.

The foreign exchange market (forex, FX, or currency market) is a global decentralized market for the trading of currencies. This includes all aspects of buying, selling and exchanging currencies at current or determined prices. In terms of volume of trading, it is by far the largest market in the world. The main participants in this market are the international banks. Financial centres around the world function as anchors of trading between a wide range of multiple types of buyers and sellers around the clock, with the exception of weekends. The foreign exchange market does not determine the relative values of different currencies, but sets the current market price of the value of one currency as demanded against another.

According to the Bank for International Settlements, the preliminary global results from the 2013 Triennial Central Bank Survey of Foreign and OTC Derivatives Markets Activity show that trading in foreign exchange markets averaged $5.3 trillion per day in April 2013. 

What is a 'Binary Option'

A binary option, or asset-or-nothing option, is type of option in which the payoff is structured to be either a fixed amount of compensation if the option expires in the money, or nothing at all if the option expires out of the money. The success of a binary option is thus based on a yes or no proposition, hence “binary”. A binary option automatically exercises, meaning the option holder does not have the choice to buy or sell the underlying asset.

BREAKING DOWN 'Binary Option'

Investors may find binary options attractive because of their apparent simplicity, especially since the investor must essentially only guess whether something specific will or will not happen. For example, a binary option may be as simple as whether the share price of ABC Company will be above $25 on November 22nd at 10:45 am. If ABC’s share price is $27 at the appointed time, the option automatically exercises and the option holder gets a preset amount of cash.

Difference Between Binary and Plain Vanilla Options

Binary options are significantly different from vanilla options. Plain vanilla options are a normal type of option that does not include any special features. A plain vanilla option gives the holder the right to buy or sell an underlying asset at a specified price on the expiration date, which is also known as a plain vanilla European option. While a binary option has special features and conditions, as stated previously.

Binary options are occasionally traded on platforms regulated by the Securities and Commission (SEC) and other regulatory agencies, but are most likely traded over the Internet on platforms existing outside of regulations. Because these platforms operate outside of regulations, investors are at greater risk of fraud. Conversely, vanilla options are typically regulated and traded on major exhchanges.

For example, a binary options trading platform may require the investor to deposit a sum of money to purchase the option. If the option expires out-of-the-money, meaning the investor chose the wrong proposition, the trading platform may take the entire sum of deposited money with no refund provided.

Binary Option Real World Example

Assume the futures contracts on the Standard & Poor's 500 Index (S&P 500) is trading at 2,050.50. An investor is bullish and feels that the economic data being released at 8:30 am will push the futures contracts above 2,060 by the close of the current trading day. The binary call options on the S&P 500 Index futures contracts stipulate that the investor would receive $100 if the futures close above 2,060, but nothing if it closes below. The investor purchases one binary call option for $50. Therefore, if the futures close above 2,060, the investor would have a profit of $50, or $100 - $50.

How Do Binary Options Work?

A binary option asks a simple yes/no question:

Will this market be above this price at this time

If you think yes, you buy the binary option.

If you think no, you sell.

Either way, your price to buy or sell is between $0 and $100. Whatever you pay is your maximum risk. You can't lose any more.

Hold the option to expiration and if you're right, you get the full $100 and your profit is $100 minus your purchase price.

And with Nadex, you can exit before expiration to cut your losses or lock in the profits you already have.

That's pretty much how binary options work.

Trade Many Markets from One Account

Nadex lets you trade many of the most heavily traded financial markets, all from one account:

  • Stock Index Futures
    The Dow®, S&P 500®, Nasdaq-100®, Russell 2000®, FTSE China A50®, Nikkei 225®, FTSE-100®, DAX®

  • Forex
    EUR/USD, GBP/USD, USD/JPY, EUR/JPY, AUD/USD, USD/CAD, GBP/JPY, USD/CHF, EUR/GBP, AUD/JPY

  • Commodities
    Gold, Silver, Copper, Crude Oil, Natural Gas, Corn, Soybeans

  • Economic Events
    Fed Funds Rate, Jobless Claims, Non-farm Payroll

    Trade Many Markets from One Account

A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of Exchange using cryptography to secure the transactions and to control the creation of additional units of the currency.Cryptocurrencies are classified as a subset of digital currencies and are also classified as a subset of alternative currencies and virtual currencies.

Bitcoin became the first decentralized cryptocurrency in 2009.Since then, numerous cryptocurrencies have been created.These are frequently called altcoins, as a blend of bitcoin alternative. Bitcoin and its derivatives use decentralized controlas opposed to centralized electronic money/centralized banking systems.The decentralized control is related to the use of bitcoin's blockchain transaction database in the role of a distributed ledger.