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Trading has become more popular in recent times. The advent of the internet and computers has made this activity more accessible to many. This has led to the adoption of many markets that offer highly profitable trading opportunities, such as the crypto and forex markets. These markets offer different financial products, and each has its gimmicks to it. In order to thrive while surfing these markets perfectly, one must understand where they intersect and differ. If that is what you have set out to do, then be rest assured you are at the right place.
Crypto and Forex
Simply speaking, forex involves trading the possession of different currencies in the financial markets. Cryptocurrencies, conversely, are a more recent development. It uses advanced blockchain technology to develop and host tradeable cryptographically-designed digital assets that have corresponding values in fiat. This seems easy enough, but there is much more to trading in these markets. Some of these additional features are common to both markets. For instance, how to trade forex is similar to trading crypto. But that is a spoiler to this piece’s next segment.
Similarities between Crypto and Forex
- Strategy: Firstly, it is commonplace that virtually the same factors drive both the cryptocurrency and forex markets. Demand and supply occasioned by determinants such as hedge funds, trading pools, whales, and other investors are the true drivers of both markets’ values. The more trading volume goes towards acquiring the assets, the higher the prices for the units on offer, and vice versa. Therefore, similar strategies can be used to navigate both markets, hence the earlier spoiler that how to trade forex is similar to crypto. Some popular strategies common to both include day trading, swing trading, and scalping.
- Interface Features: Both markets are tradeable on a smartphone or computer. Seeing the similarity in the trading strategies for markets, it would not be a surprise that both have similar interfaces and tools to perfectly execute those strategies. For instance, they both sport charts to track past price movements and speculate about the future. Additionally, both crypto and forex spot markets have trading features such as limit orders and stop-loss.
- Markets: Crypto and forex both possess a wide variety of trading markets. You can trade in areas such as spot markets, futures markets, and options markets in the crypto space, likewise in forex.
- Risk and Reward: Both cryptocurrency and forex markets have significant risks and rewards attached to them. Many are attracted to trading in these markets because they offer several profit-making opportunities. However, they also carry a significant risk of you losing your investments. Thus, risk management and profit maximization are the watchwords for both markets.
Differences between Crypto and Forex
- Products: The most paramount difference between crypto and forex markets is the kind of financial products they offer. Forex markets and how to trade forex mainly
- deals with the exchange of the legal tender of countries. This means currencies like the US Dollar, the British Pound Sterling, the Euro, the Canadian Dollar, and the Japanese Yen make up the forex markets. The cryptocurrency market, however, is laden with digital currencies such as Bitcoin and Ethereum instead of national currencies. It is noteworthy that some cryptos are considered legal tender in some countries.
- Age: The forex market has been in session since states began issuing their monies. Factors such as international trade and warfare led to the exchange of currencies, becoming the earliest form of forex. How to trade forex in the contemporary sense can be dated back to the late 20th century, though. Even at that, it is still far older and more developed compared to the crypto market, which only became mainstream with the launch of Bitcoin in 2009.
- Degree of Risk: Although both markets are risky, the crypto market possesses much higher risk than the forex market. This is because the crypto market is relatively novel and unregulated, and it is rather easy to launch new currencies that could end up crashing or being scams. Forex trading risk is highly controlled due to the official institutions regulating how to trade forex and the kind of assets on the market.
- Liquidity: The forex market is statistically the most liquid market in the world, with trading volumes approaching 7 trillion dollars, according to official numbers. The crypto market possesses a certain degree of liquidity too, but most of it is confined to the major cryptocurrencies in Bitcoin and Ethereum. Thus, thousands of smaller cryptocurrencies lack liquidity and are often susceptible to slippage.
- Durations: The crypto market is usually open permanently. This means investors have to monitor the market every time, and it also gives them the opportunity to make profits from weekend movements. The forex market is only open from 5 PM EST on Sundays to 4 PM EST on Fridays. Thus, forex traders do not usually trade for the better part of the weekend.
Having explored the similarities and differences between crypto and forex markets, a lot must have come into the light for you to consider. Both markets are profitable in their own ways, and it would be a plus to know how to navigate both markets with their peculiarities. Thus, learning how to trade forex could be your guide to learning how to trade crypto, and vice versa.