Binary Options are excellent hedging tools in conjunction with conventional Forex positions.
First let us have a look at why Binary Options can act as a hedge against traditional Forex:
1) Fixed Risk/Reward: Unlike Traditional Forex Binary Options have two predetermined and fixed outcomes. Either you are in the money at 85% return or you are out of the money (out either your invested amount or less depending on the instrument).
2) Capped Risk: Unlike Traditional Forex with Binary Options you can never lose more than your invested amount. There is no need to place Stop-Losses in Binary Options.
3) No Leverage: Unlike Traditional Forex Binary Options trading does not require leverage in order to succeed. You can profit without risking a single cent more than your trade amount. As you already have your Stop-Losses on your Traditional Forex positions you may use your Binary Options trading to hedge against your forex positions without using leverage.
4) Directional Hedging: Unlike Traditional Forex with Binary Options you are only trading on the direction the asset will close at expiry either higher or lower. That allows you to place your hedge by trading a CALL or PUT for the opposite direction of your traditional Forex position.
Say you take a conventional Forex GBP/JPY (short or long) position combined with a Stop-Loss. To hedge you would simultaneously buy either a PUT or CALL Binary Option in the opposite direction of your traditional Forex position. This can cover your losses or help you even be profitable in the event if your (short or long) position fails.