Forex trading vs Crypto trading
Forex is an abbreviation of Foreign Exchange, which refers to the exchange of one country's currency for another.
It involves the buying and selling of currencies on the foreign exchange market. Trading occurs in centralized markets where two parties agree on a price at which they buy and sell.
The forex market trades 24 hours per day and 5 days per week (closed weekends). The London and U.S./London markets overlap from 8 am to noon EST, which is the busiest hours of forex trading.
The forex markets trade in pairs such as EUR/USD or GBP/JPY. The first listed currency of a currency pair is called the base coin, and the second one in order is known as the quote.
The two currencies compare values with one being worth more than another by comparison.
To trade in the forex market, you need to set up an account with a brokerage firm where they deal with foreign exchange transactions.
They will charge commission fees on every transaction but these costs can be minimized through careful research prior to signing any agreements from different brokers who offer better rates than others.
The key here is determining which one has lower commission fees plus still provides good customer service and usability tools such as online platforms or mobile apps for your use.
You cannot open a forex trading account without fully verifying yourself.
To open an account with a forex broker you will be requested by your broker to provide a valid government-issued ID, or passport together with a utility bill as proof of address in your name with the current date on it.
Cryptocurrency is a digital or virtual currency designed to work as a medium of exchange. It uses cryptography for encryption, security and not backed by any government or central bank.
Cryptocurrencies can be bought on exchanges with other cryptocurrencies, fiat currencies such as US dollars, and various online payment systems that offer cryptocurrency features.
The cryptocurrency market is always open, 24 hours a day and 365 days of the year.
The world’s most popular online cryptocurrencies are available around the clock in many different places from just about anywhere with an internet connection, making it one of the fastest-growing markets today.
In order to trade in the crypto market, you need to open an account with a cryptocurrency exchange. Binance is the most well-recognized company in the market you can buy & sell confidently.
Opening an account with a crypto exchange is usually very simple. You may not even need to verify your identity when you initially create your account.
However, if you want to deposit and withdraw assets from a crypto exchange you will need to verify yourself as a legitimate user. Crypto exchanges usually ask users to provide one or a combination of the following documents.
A photo ID (This can be your driver's license, passport, or state-issued identification card.) and proof of address. Proof of address is often in the form of utility bills and bank statements that show your name on them.
It is very common that crypto exchanges request the account owners to make a selfie when holding his/her passport, or ID with one hand while holding a piece of paper with the current date written with another hand.
If you have no previous knowledge about cryptocurrencies or you simply look for developing better trading skills, I recommend checking out Intelligent Cryptocurrency.
It is a great cryptocurrency community and education program that helps beginners & advanced to take their crypto trading skills to the next level.
What are the difference between forex and crypto?
Authority of control
Cryptocurrencies are unregulated (or regulated to some extent) by a central authority and generally decentralized, as opposed to the regulated forex market.
Cryptocurrencies are completely different than fiat currency because they cannot be redistributed or controlled by any centralized institution like banks and government agencies.
This means everything is done within cryptocurrency transactions remains anonymous unless the wallet owner explicitly shares his/her wallet details. This makes crypto a perfect medium to make transactions without worrying about being discovered.
Forex market is the world's most traded market. It is bigger than the stock market, the cryptocurrency market, and even both combined.
The cryptocurrency market trades around $200 billion USD per day, while the forex market trades around $5 trillion USD per day.
The forex market has been around for a long time and it is worth trillions of dollars.
Cryptocurrencies, on the other hand, were born with Bitcoin in 2009 when it emerged as an alternative way to do banking transactions without having to rely too heavily upon centralized institutions such as banks or governments.
The world of FX is one that's traditionally been dominated by large corporations. The retail market, which only consists of 5% of the total volume.
This small percentage mostly consists of smaller companies and individual traders who trade with brokers or international banks.
Players of the cryptocurrency market is different than forex market. Crypto market is more dominated by retail investors rather than institutional investors. However, institutional interest on cryptocurrencies are growing at a rapid rate.
Major investment funds like Goldman Sachs and others have started to pour money into Bitcoin and other cryptocurrencies.
Forex trading is usually leveraged. Because the currency market is typically not a volatile market. Most traders utilize some level of margin or leverage in order to trade with meaningful capitals.
Leverage allows forex traders to make larger investments with less capital which is a useful proposition to have.
On the other hand, the cryptocurrency market is typically not leveraged. However, more and more crypto exchanges started to offer leverage trading options. You can trade leverage trade today on Binance, Bitmex, and many more.
Although leverage is a useful trading tool, it makes crypto trading very risky.
Because the crypto market is by itself an already volatile market. Adding the extra leverage exposes trading capitals to large risks unless one doesn’t know what he/she is doing.
There are tens of thousands of brokers in the traditional FX business, ranging from the street exchange office to the local credit card payment provider to the small bank that typically deals with some of the biggest brokers.
If you have visited an exchange office and exchanged one currency to another, you have already traded in the forex market.
Trading commissions are much lower on the forex market than they are on cryptocurrency exchanges.
The main difference is that while cryptocurrencies have a fixed commission, while forex trading changes dynamically depending on the trading time, and the broker executed the exchange.
Major Price Drivers
The forex market is driven in large part by macroeconomic factors such as interest rates, inflation, and unemployment. On the other hand, crypto markets are largely influenced by microeconomic variables as well as popularity.
Should you trade crypto or forex?
Cryptocurrency and forex trading both offer unique opportunities for a lucrative career in the right hands. However, to reach this goal one needs to learn and practice trading skills.
It is not even all yet.
Without having a solid risk management plan, and emotional control your trading career is doomed to fail in the long run.
Focus on a few pairs only
The good news is most of us don’t need to know and follow all crypto pairs.
There are traders making a comfortable living simply trading in between major crypto pairs like ETH/BTC or BTC/USD.
Again if you trade forex, it is better to stick a few pairs you can continuously practice and master. However, most forex traders are get lost in exotic pairs in an effort to make money by trading pairs that are not familiar at all.
What to Know
The forex market is a currency exchange and the rules are complicated. Unlike cryptocurrencies, you need to have knowledge of money markets in order to successfully trade in there.
This means having an eye on world macroeconomics as well so that you know what's going on with other countries when it comes to their economies which can affect your trades.
Crypto trading requires an understanding of crypto projects, the team behind it, and the use case. If you plan to buy today hold a few days and sell, you may not very much need to know fundamentals.
Reading charts and giving a trading decision is perfectly fine for short-term traders and day traders. However, if you are looking for much more like an investment, or long-term trade, you need to pay attention to the fundamentals.
Right Mindset Matters
Going into any trade with confidence is key for success in this business because there is always some level of uncertainty involved which makes it risky by definition as one never knows what will happen from day-to-day due to outside factors such as economic changes around the globe that have global implications but can be hard to predict.
It all depends on your strategies and goals. Forex may be right for you if you want to trade over-the-counter and have access to it 24 hours a day, seven days a week.
However, if privacy is important to you and the ability to trade at any time of day sounds appealing, give cryptocurrencies a try.
Trading any market successfully requires an understanding of how to read charts, differentiate between trading pairs and tokens, understand market sentiment/expectations with chart analysis tools like MACD & RSI indicators among other things.
Being a profitable trader takes a lot more than luck.
It's no secret that trading carries its own risk and rewards. Forex transactions are monitored more closely than crypto, which could be a good or bad thing depending on your point of view.
Crypto is the wild card in this game with promises of larger returns but also higher risks to consider when making trades.
The forex market is different from the cryptocurrency market in many ways, including liquidity and volatility.
In order to succeed as a trader on these two markets, you would need to employ quite opposite trading strategies for each one of them.
Each marketplace is unique in terms of size, behavior, and structure. There are similarities in them yet same strategizes don’t apply completely in these two markets.
The most important thing in trading is to manage risk. It's what separates the winners from losers. It is the only way for any trader to achieve long-term success, regardless if they're trading in the forex or crypto market.
Proper risk management and discipline should be prioritized by any trader setting trading accounts up for growth rather than a total loss.
You should determine how much to invest in a position based on what is comfortable for you and the size of the time frame that's pertinent to your trading strategy.
You're not going to make a profit on each trade. But if your trades are spread out over an extended period, and you have a little edge over other traders then statistically speaking your odds will work big in your favor.
Important tip: There are forex brokers that have been offering crypto trading on their platform. You should never trade crypto in a forex trading account although it may seem appealing to trade all assets under one roof.
The main reason behind the forex market is closed at the weekends, and only partially active on some national holidays.
If you want to exchange crypto at the weekend or close an open position you will not be able to do it on weekend. You will need to wait until Monday.
Also, by default, your forex trading account is leveraged 1:5, 1:20, etc. If you trade crypto even in a 1:5 leveraged account, you expose yourself to massive volatility, and it makes it too hard to manage risks.