The realm of cryptocurrencies and binary options is one that for now, remains unexplored by the majority of the financial world. While they are options available to conduct transactions using either of them, at the moment, they are usually not the first options for most people. For example, instead of trading binary options, many people choose the spot market, the futures market or even ETFs when trading foreign exchange. For conducting online transactions, the majority of people choose digital methods that use paper currency like PayPal or even wire transfers over using digital currencies like Bitcoins. For now, it remains even more unusual, for people to use bitcoins to trade binary options.
How To Trade Binary Options with Cryptocurrencies
For the few that do trade the cryptocurrency using binary options, they have access to the unique set of advantages that both of them provide. Primarily, bitcoins as an emerging currency provides unique trading opportunities, that is further exploited using the binary method of trading.
Currently, there are two ways to trade CFDs bitcoins using binary options. The first involves trading bitcoins as an investment, where you directly deposit bitcoins with a binary options broker. Therefore you are trading bitcoins directly, and any profit you make would be in bitcoins.
The second way is to trade it as an asset or a currency pair. In this way, traders would engage in bitcoins trading by trading it against another currency as most spot currency trading is done. It would be common to see trading pairs like BTC/USD or BTC/EUR if a trader uses this option.
Why We Don’t Recommend It
The major disadvantage of using bitcoins to trade binary options, however, has to do with how binary options are set up. Binary options are one the most expensive financial instruments to trade for retail traders. The spreads of binary options are extremely high, unlike spot trading, and this means whenever a trader takes a binary option position, he first has to make up the difference in loss from the high spread in order to make a profit. This disadvantage plus the inability to take long-term positions on binary options sets the trader at a disadvantage as due to the high volatility in the cryptocurrency market, it becomes extremely difficult to follow any trend that may present itself.
What We Do Recommend
So how does a trader avoid all the disadvantages?
Well, he may need to avoid binary options altogether when trading cryptocurrencies. Instead, he may look to day trading on the spot market for success. Unlike binary options which require you to choose the expiration of the option that you take (sell or buy), with day trading you can hold a position for as little or as long as you like.
This gives a world of freedom to the trader, who can ride out the false signals that volatility causes in the market when making a trading on the trend. Or, the trader can use a scalping strategy and end their fast trades whenever they want to, with much better spreads than binary options. Also, unlike binary options which have a smaller asset pool, traders who day trade have more assets available to them, so that they may balance their trading portfolios across several currencies and commodity pairs.
Taking all these advantages into consideration, simply put, in comparison to binary options, day trading cryptocurrencies would be the better option for the majority of forex traders.