Binary Options vs. Day Trading

An option is precisely a kind of financial derivative that gives the buyer the right and not the obligation to either sell or to buy a certain fixed amount of security or the underlying financial asset at a particular rate known as ‘strike price’. 

Binary option exercises in its different form, so the buyer or holder does not choose to sell or buy the underlying assets. 

And in Day Trading, the profit depends on many factors like entry price, the total number of shares, exit price, contracts, payoffs, and many more. 

Talking about the traders for both the options, Binary Options traders sets gambling like whether the asset’s price will be above or below the prediction done out of the two outcomes done before the expiration date. 

In the case of Day Traders, they attempt to predict the price direction, but all sorts of profits and losses depend on the same factors mentioned above, like size of the trade, entry price, and money management techniques. 

In both, the traders can continue trading knowing the outcome like a gain or loss by using targets.  

What Day Trading Actually Is?

Day Trading is a hypothetical concept or buying security or its derivative on the same trading day. It diversifies the speculative methods which can be achieved in any marketplace.  

It is more practically practiced and used with Forex (Foreign Exchange) trading, options, stocks, and futures contracts worldwide. 

It is reserved by traders working in financial firms and practice this as a lucrative hobby. 

And nowadays anyone can become a Day trader. 

In terms of career, Day trading can be a difficult task and a little bit challenging, so before starting this, gain knowledge of the trading world and its basics. 

Bottom Line

Day trading is also a bit controversial concept in the trading world, but viably, it can give huge amounts of profit with practice. Without a profitable strategy, many traders lose a lot of money and fail to make trades. And it does play a vital role in the marketplace. 

Get To Start with Day Trading

  • Pick a Market- First, decide which market you want to trade and work in. 

Forex markets are quite popular and widely accepted among beginners because of their low initial deposit account, around £260. In Binary Options, these deposits can be even lower, but it is within the margin. 

  • Market Hours– It is also one of the most important aspects to investigate before you start trading. Keep a look into the timing hours of trading you spent in a day.

So as a day trader, it’s essential to look out into the strategies to implement the trading successfully.

  • Risk Management- Here, trade risk plays a major role. It tells how much you are willing to lose on each trade of certain contracts. An ideal standard risk rate is about 1% or even less than this. 

Some Day Trading Tips

1. Be Patient and Realistic Trader

2. Be a Consistent Trader 

3. Always look for an opportunity 

4. Be practical and aware. 

Now let’s dive deep into the topic and understand the basic differences and similarities between Binary Trading and Day trading.

Differences And Similarities Between Binary Trading Options and Day Trading 

Both the Binary Trading Options and Day Trading Options are subsequently different in their ways. Form both the ways you can trade and make money or might also lose in the financial market. 

Like in Binary Option, the whole concept is based on possibilities of the outcomes, i.e., on ‘Yes’ or ‘No’. These types of options are solely based on profit/loss propositions.

Meanwhile, in Day Trading, the whole notion is all about the open or closed positions during the same trading session. And the number of factors on which it is based are already stated above.

Some of the trader perspectives on Day trading are based on CFD, another popular trading instrument. CFD (Contract for Difference) is a financial contract concerning an underlying asset between a buyer and seller primarily based on payment of the differences in the settlement prices. 

CFD is generally not recommended for new traders.  

Payouts

Even in normal options, trading payout plays an important role. It is the fixed monetary amount.

In Binary Option, payout varies, and they lie in between 60% to 90% or even more than 90%, depending on the trade. Payouts are generally the expected returns that a trader receives if the trade finishes before the expiration.

While in Day Trading, there is buying and selling of contracts or stocks in a short time frame. So, in this type of trading, it requires some significant price to move into the profit. To increase profits in Day trading, many traders apply different strategies like using borrowed money to make trades in the financial market. 

Entry Costs

Talking about the entry costs, Binary Options are quite open; to get started in trading, Binaries have a bit low cost. Likewise, in Day Trading, the costs of entry are high.

Day trading is not cheap, and note it requires a minimum account balance of 

about $25000.

Taxes

Work of taxes in case of Binary Trading Option is much easier than any other option. Working with brokers is a little easier. Also, taxes are deducted in each trade as you go more ahead. Almost 25% of future tax is paid in Binary Trading. Also, they are not liable for income tax due to their possibilities and speculative trades. 

Meanwhile, in Day Trading, taxes are considered as a hoop, and they are less. 

Efficient in terms of taxes. There is a requirement to pay taxes on investment gains. Capital gains and dividend distributions also require investors to pay taxes. But long term or professional investors may avoid these taxes. 

Risk Management

Firstly, what does Risk Management mean? It is the process of analyzing and reducing the losses in trading in the financial market.  

In the case of binaries, this is also another factor one should take seriously. The risk management rule which many traders adopt is not more than 5%. However, they offer fixed risk, an ‘all’ or ‘none’ type of market. 

While in Day Trading, it does involve significant risks. But it requires fine strategy and in-depth understanding, and due to this puzzle, many traders fail out in risk management. So, they often stick to a 1% risk rule which limits the risk on any of the given trades. 

Accessibility

‘Ease of access’ in binary option there is the ease with the timings. Timings are based on your accessibility. So, you can log in whenever you want, at night or on the weekends, and join the trader groups attempting to turn high daily profits. 

In the case of Day Trading, the accessibility hours are a little less. But time frame in this can vary according to the countries. It lacks accessibility, but it is a very profitable option if traders use them in the long run with strategy and proficiency.

Reliability 

In Binary options trading as an Intraday trader, time can be the serious profitable cash. So first, check the broker’s offer before any contract. Some brokers offer 24/7 customer support. Binary options trading with 24 Option can be a smart move for top-quality support and help. 

Day trading requires a lot of time and effort, which is why it is called Day Trading. Also, the success rate of the average day trader is about 10% and can differ also. 

Conclusion 

Binary Options traders usually ‘bet’ on the asset, based on predictions like whether the underlying asset’s price will rise or fall in the trading market at a certain specified time. 

Day Traders also have the same case to predict the price direction, but the outcome (profit and loss) depends on entry and exit price, money management, and strategy.

Also, strategically, the trading range fluctuates daily or even throughout the day, and the trader’s profit is calculated in terms of settlement price or the opening price. In Binary Option, as traders can usually know the maximum possible profit and loss, the same is true with day traders. They also know the profit targets.

However, they have the option to let their profits run to gain and take more advantage. 

So, both Binary Options and Day Trading have their pros and cons. But they have their plus points too. So, investigate all the strategical observations and then do trading.   

About the author

I am an experienced Binary Options trader for more than 10 years. Mainly, I trade 60 second-trades at a very high hit rate.

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