Becoming a trader involves responsibility and a lot of knowledge. So another thing that we are going to talk is the difference between CFD and Binary Options. First of all CFD or Contract for Difference is between two parts: the broker and the trader. They make a contract where the broker pays the difference value of the asset at the strike price and its value. This kind of trading is available on UK, Canada, Hong Kong and European markets.
When you trade binary options you are exposed to more risks then when you trade CFD. In the case of trading contracts for difference you can have your broker use leverage in your trades. When you are not satisfied with your predictions you can withdraw from trading right away. On the other hand, binary options have a fixed date when they expiry, but CFD can be closed any time.
You may already know CFDs are not allowed in US market, excepting Forex market.
Another difference is that in binary options the trader knows before the trade goes on the market if what are the potential winnings or loses. As we were saying before, binary options have their risk calculated before they go on the market. So the trader can estimate the potential risk. In case of CFDs, it’s more complicated because in this case there is a contract that will make you money when the difference value is positive. So in this case the trader can predict the difference that it’s going to be between two assets.
One other difference between CFDs and Binary Options is that CFD traders have to pay commissions and fees to their traders. The binary options trader don’t have any kind of commissions. They just need to worry about how much they are going to invest in one position. Also don’t forget about the withdrawing fees if you are making any kind of profit.
As you can see CFD are more suitable if you whant a rapid profit, but only if you have experience and a higher amount in your account.