Forex vs Crypto trading is one major subject matter that a lot of financial market enthusiasts find very confusing as regards which one to invest in.
As a beginner, if you are planning to learn how to trade and you would like to explore the Forex and Crypto markets, you must be wondering which of these is more lucrative and the differences and similarities between both markets.
With more and more investors switching to the crypto market every day, this article analyzes the benefits offered by both the markets along with the risks involved.
Unlike other markets, Forex and Crypto are reportedly two of the riskiest but profitable markets for traders, thanks to the enormous profit an individual can make from them.
Critical differences between Crypto Trading and Forex Trading
Many available instruments: One of the significant differences between these two markets is the number of available instruments. Forex traders trade in currency pairs like EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, etc. However, the options are limited only.
When it comes to Cryptocurrency trading, there are more than 11,000 different cryptocurrencies available. Unfortunately, the number of cryptocurrencies keeps growing every day too much that it is hard to keep the count.
Although only a few coins are usually actively traded, some include; Bitcoin, Ethereum, USDT, Cardano, Polkadot, and others.
In a nutshell, the crypto market offers you more options when it comes to trading compared to the forex market.
Liquidity: The forex market is highly liquid in terms of liquidity. The forex trading volume exceeded 6.6 trillion back in 2019. This high liquidity makes it very easy for any trader to sell or buy any of your favourite currency pairs. This availability of high liquidity also makes it easy for any trader to get out of the trade at your desired price.
This feature does not apply to most cryptocurrencies. Although if you are trading in the most popular coins, this will not be an issue if a trader is trading in less available currencies, then you may not get to exit your trade at your desired price.
Volatility: The crypto market is more volatile than forex when it comes to volatility. If you look at any cryptocurrency market, you would only see ups and downs, but the forex market is relatively stable. However, even the smaller cryptocurrencies can move up or down hugely.
Such moves are hard to see in the forex markets, and it only happens in the exotic pairs. This volatility makes it easier for forex traders to control risks.
Profit Potential: Crypto markets gained massive popularity due to their enormous Return On Investment (ROI). If you take a considerable risk, you will enjoy a great profit, but it is imperative as a trader to choose the right cryptocurrency you want to invest in.
The forex market also offers enormous profits, but you must increase your forex trading potential using leverage. In situations, if you face a loss, you will lose a lot of money. Hence, the need to be careful with your trades.
Similarities between Crypto Trading vs Forex Trading
Decentralization: Both the crypto and forex market is decentralized, meaning there is no central regulation on the market. However, this doesn’t mean that the market is unstable. You have to be careful with your investments.
Similar Market Operation: Both markets have a similar market operation. They work on the concept of supply and demand. If there are more buyers than sellers, the price will go up. In the case of more sellers, the price will go down.
In case of any negative or positive news, the price of cryptocurrencies and currency pairs will be affected.
Trading Account: As a financial market enthusiast interested in getting started with crypto or forex trading, you need to have a trading account. Also, it would help if you had a computer or a smartphone with a stable internet connection. Both markets rely heavily on charts. So, if you know how to trade in forex, you won’t have a problem with the crypto market and vice versa.
How to Trade in Crypto?
Getting started with crypto exchange is not really complex, and there are a few things you are going to need.
First, you will need an account on any leading cryptocurrency trading platform such as Binance, Bybit, FTX or Phemex.
So go ahead and create an account for any of the crypto exchanges you intend to use and complete your KYC. Once you have your account ready, you need to deposit the amount you wish to buy.
Then you must go to the crypto market and place a buy order to purchase your favourite currency. Similarly, you can place sell orders from the same market.
In a nutshell, these are some of the major differences and similarities of the crypto and forex markets. I hope this has helped you to get a clear idea about how these two markets are different from each other. In case if there is anything else you wish to ask, then comment below.