The difference between Binary Options and Forex, from how they work to their affiliates

The difference between binary options and forex, can be seen from various points of view such as legality, affiliates and how they work. Check out the complete information in the following article.

Overview of the Differences between Binary Options and Forex

The following is a summary of the differences between binary options and forex.

difference between binary options and forex

Let ‘s discuss one by one about the differences between the two.

Legality of Binary Options and Forex?

We will discuss legality in terms of legislation in Indonesia.

 

Is Forex Trading Legal?

Trading forex ( foreign exchange ) or foreign currencies is included in commodity and futures trading.

In Indonesia, commodity and futures trading is under the Indonesian Ministry of Trade.

Futures and commodity trading is regulated in Law No. 32 of 1997 concerning Futures Trading. Then the regulation was revised to become Law No. 10 of 2011 .

 

Article 3

Commodities that may be subject to Futures Contracts, Sharia Derivative Contracts, and/or other Derivative Contracts are regulated by the Regulation of the Head of CoFTRA.

 

Further explanation is contained in the Regulation of the Head of the Commodity Futures Trading Supervisory Agency No. 90/BAPPEBTI/PER/10/2011 .

The regulation was later amended several times and finally became the second amendment, namely No. 114/BAPPEBTI/PER/12/2014 .

 

article 1

Commodities that can be the subject of Futures Contracts that we trade on the Futures Exchange are:

  • In agriculture and plantations : coffee, oil palm and its derivatives, rubber, cocoa, pepper, cashew, cloves, peanuts, soybeans, corn and copra.
  • In the field of mining and energy : gold, tin, aluminum, fuel oil, natural gas, electric power and coal.
  • In the industrial sector : sugar, plywood , pulp and paper, yarn, cement and fertilizer.
  • In the field of right and marine fairies : shrimp, fish and seaweed.
  • In the field of finance : foreign currency and Government Securities (SUN) of the Republic of Indonesia.

The Ministry of Trade and CoFTRA as the regulator will make regulations and oversee the futures exchange and its members.

Are Binary Options Legal?

How is it legal to play binary options in Indonesia? 

Quoting a source from Tempo in the release of the Investment Alert Task Force (SWI) on Saturday 19 February 2022, Head of SWI Pak Tongam L. Tobing said:

“ Online trading activities carried out by binary options are illegal because they are gambling , no goods are traded. It’s just chancy .”

 

How is CoFTRA binary options permission?

Citing a source from Kontan in a written statement, Plt. Head of CoFTRA, Indrasari Wisnu Wardhana, February 2, 2022 said:

“Throughout 2021, CoFTRA in collaboration with Kominfo has blocked 1,222 domains of unlicensed commodity futures trading websites and gambling under the guise of trading .”

 

From these thousands of websites , there are 92 binary options domains that are blocked such as Binomo, IQ Option, Olymptrade, Quotex and other similar platforms .

CoFTRA also blocked 336 trading robots such as Net89/SmartX, Auto Trade Gold, Viral Blast, Raibot Look, DNA Pro, EA 50, Sparta, Fin888, Fsp Akademi Pro and other similar companies.

The conclusion from the release of Tongam L. Tobing and Indrasari Wisnu Wardhana is that binary options are illegal and gambling under the guise of trading .

 

How Do Binary Options and Forex Work?

The main difference in how binary options and forex work is from the concept of time limitations. What is the time limit like?

 

How Binary Options Work

The way binary options work is to guess the price (whether it will go up or down) within a certain time period .

Take a look at the following picture:

Binomo App View

Binomo Application Display, One Type of Binary Options.
Source: Kompasiana.com

 

In the image above there is a line that shows the remaining time limit.

The way binary options work is to guess the price , whether the price will go up or down within a certain period of time (eg in the next 30 seconds).

 

How Forex and Futures Trading Works

To do forex trading and futures trading, you can analyze price movements (using a technical analysis approach), without any time limits.

Forex and futures trading has been around since the 1990s. There are many technical analysis books written by experts, such as candlesticks , indicators, price action strategies and so on.

According to the author, forex and futures trading is not an investment, but a TRADING activity . The author once wrote down how to trade for beginners in an ebook .

Please download the trading ebook for beginners so you can understand how to trade .

If you want to learn more about trading , you can join the Learn Trading with Practice program, called TRADERS LAB .

Traders Lab is a collaboration between Finansialku , ICDX ( Commodity and Derivative Futures Exchange) and Agrodana Sekuritas . The main purpose of this Traders Lab is to teach you how to trade properly .

If the way of trading is right, then profits will follow.

Binary Options and Forex Affiliate

Affiliates (affiliates) are people or companies that are incorporated in a business or product with the aim of marketing the product . In simple language an affiliate is similar to a reseller .

Affiliate marketing is a normal marketing program used by many companies, one of which is e-commerce , such as Tokopedia, BukaLapak and Shopee.

So, what about affiliates in binary options and forex ?

Binary Options Affiliate

Binary options affiliates are people who help market binary options .

Binary options affiliate profits are illegal, because binary options are included in the gambling category.

The criminal threat is in the Criminal Code and the ITE Law.

According to the Criminal Code Article 303 paragraph (1) of the Criminal Code explains as follows:

Threatened with a maximum imprisonment of ten years or a maximum fine of twenty five million rupiah , whoever without obtaining permission:

  1. knowingly offers or provides an opportunity for gambling games and makes it a quest , or knowingly participates in a company for that purpose;
  1. intentionally offering or giving an opportunity to the general public to play gambling or intentionally participating in a company for that , regardless of whether to take advantage of the opportunity there is a condition or the fulfillment of a procedure;
  1. make participating in gambling games a quest.

 

According to the ITE Law, Article 27 paragraph (2) of Law Number 11 of 2008 concerning Information and Electronic Transactions:

Everyone intentionally and without rights distributes , transmits , and/or makes accessible Electronic Information or Documents that have gambling content .

Based on Article 45 paragraph (2), the penalty is 6 years imprisonment and/or a maximum fine of Rp. 1 billion .

 

Forex Affiliate

Some legal futures and commodity trading brokerage firms also use affiliate marketing strategies.

In Law No. 10 of 2011 concerning amendments to Law No. 32 of 1997 concerning Commodity Futures Trading, there are no rules related to marketing using the affiliate concept.

How to Distinguish Binary Options Traders and Affiliates

The way to distinguish binary options traders and affiliates is to look at the legality of the company. Check again the legality of the company on the CoFTRA website .

If the affiliate introduces a legal brokerage company, then the activity is LEGAL .

On the other hand, if the affiliate introduces a broker or binary options company, which is not registered on the CoFTRA website , then the activity is ILLEGAL .

Binary Options Exchange and Futures Trading

In Indonesia, there is no exchange that regulates binary options , because binary options are illegal and online gambling is disguised as trading .

Meanwhile, futures and commodity trading has two exchanges in Indonesia, namely:

  • Jakarta Futures Exchange (JFX)

The concept of trading at JFX is bilateral trading, meaning that trading is done off-exchange and then listed on an exchange.

  • Indonesia Commodity and Derivatives Exchange (ICDX)

The concept of trading at ICDX is multilateral trading, meaning that all trades are carried out on the exchange.

Risk and Reward Binary Options and Futures Trading

In correct trading , risk and reward are important. As the author said in the ebook , rule number 1 in trading is ” Stay As Long As in The Game .”

How do you keep the capital alive and growing?

The trick is with the mindset of a professional trader , disciplined in applying money management and understanding technical analysis methods .

You can listen to the following My Financial Podcast to enrich your knowledge and be able to apply the right trader mindset .

 

Risk and Reward Binary Options

The risk and reward of binary options is usually not linear, meaning the risk can outweigh the benefits.

For example, the risk and reward of the Binomo platform are:

  • If your guess is correct, then the profit is 80%
  • If your guess is wrong, then the loss is 100%.

 

Risk and Reward Forex and Futures Trading

The risk and reward of forex instruments and futures trading can be linear, meaning the risk is proportional to the return.

The following are the risk and reward brokers registered with Bappepam:

  • If your analysis is correct, then the profit is 100%
  • If your analysis is wrong, then the loss is 100%.

 

The author applies a 1:2  risk and reward strategy, for example

  • Biggest risk (using stop loss ): 10 points
  • Profit (by taking profit ): 20 points

 

The calculation of risk and reward is of course adjusted to capital and money management . From the results of these calculations, we apply them in the trading plan. 

 

Conclusion: Difference Between Binary Options and Forex

Some points we can conclude:

  1. Check the legality first on the Bappebti.go.id website .
  1. The way it works is trading in accordance with the regulation of Law No. 10 of 2011 concerning amendments to Law No. 32 of 1997 concerning Commodity Futures Trading.
  1. Affiliates are allowed, as long as the business is legal. There are 2 valid exchanges in Indonesia, namely ICDX and JFX.
  1. The risk and reward of trading is generally 1:1.
  1. With the right money management and trading plan , traders can reduce risk.

 

Hopefully the above explanation regarding the difference between Binary Options and Forex can answer your curiosity and not be trapped again with gambling under the guise of trading .

Are you interested in trading? Please write your opinion and questions in the comments column. Also share this article with other colleagues so they don’t get caught up in illegal trading.

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