Torn between Forex and Crypto? Why Not Both?
Alexa Josh is a serial entrepreneur who has founded multiple successful in businesses .
The Forex market has been around for a few decades now. But, for more than a decade now, there has been a significant change that led traders to controversy. In 2009, when the first cryptocurrency, Bitcoin, has been created, the trading market was set to change forever.
Trading forex or cryptocurrencies sounds like a great idea these days. But if you are a novice trader, choosing between these two options can be really challenging. Some professionals believe that comparing trading forex with trading crypto is like comparing pears with apples. However, this isn’t entirely accurate because there are many similar aspects between those two, as well as a number of differences.
If you have no idea what to choose, this article may help you choose both because both crypto and forex trading have a number of advantages.
Crypto vs Forex
You must be a savvy trader to fully understand the differences and similarities of the two. However, we will try to be as specific as possible to help you understand the pros and cons of both trading practices.
Crypto trading is often thought of as similar to Forex trading mainly because somehow both of them involve trading currencies. Yet, the two have many differences so let’s start with understanding both in order to understand their similarities and differences:
If you have ever traveled abroad on a vacation, chances are that you have most likely exchanged your money for the local currency. If you have done that, you could say that you have traded currencies. However, although the principle of forex trading is the same, the act of trading doesn’t take place in a physical currency exchange
office but rather on a digital decentralized market.
Naturally, as the trading takes place in the digital world, there is no single location for traders to transact currencies. Everyone with a computer and a good internet connection can get online and trade forex.
Forex also involves a middleman, be it a broker or other institutions that take fees from the traders every step of the trading process.
Forex trading is now a large and well-established practice, while cryptocurrencies are still a newcomer to the scene of trading. Cryptocurrencies are digital assets that involve peer-to-peer financial transactions. What made cryptocurrencies so popular but also controversial in the trading scene is the fact that they have created a global transaction market that functions independently from both central banks and governments.
Similarities between Crypto and Forex trading
As mentioned before, although some people believe that crypto and forex trading
are nothing alike, there are, in fact, many similarities between the two. Here are the main similarities between them:
- Both types of trading involve trading multiple currencies in the digital world
- Both crypto and forex prices are naturally based on the demand and supply existing on the market
- Both trading marketplaces exist and function on a number of platforms
- Both trading practices require a relatively short amount of time to trade which provides flexibility to traders
- Both crypto and Forex markets have high volatility which can cause a significant price change in a relatively short amount of time
- Both trading practices involve multiple currencies. While the Forex market includes all national currencies, the Crypto market also currently includes over 3000 cryptocurrencies. However, in the Crypto market, Bitcoin still remains the most popular traded currency. So, if you opt for Crypto trading you may want to replenish your Forex trading account by BTC (Bitcoin).
Differences between Crypto and Forex trading
Although the crypto and Forex market have many similarities, there are also very important differences that traders must know when choosing between the two:
- While the traditional forex markets include retail customers and small corporates, 94,5% of the players are institutional players, in the current Crypto market there are no institutional players and the market only includes retail traders. Obviously, the involvement of established institutional players can make it more difficult to compete in the Forex market.
- Forex trading has an average daily turnover higher than crypto trading as the Forex market is an old player in the trading scene and is already a very well-established practice.
- Forex trading is as old as the existence of national currencies meaning that it is a more stable trading option whereas the crypto scene is pretty new which sometimes makes it more volatile to market conditions.
- Cryptocurrency can become a challenge because, in some parts of the world, traders can not fully utilize their gains. On the other hand, the Forex market is time sensitive as it can be highly affected by different factors such as economic strengths or geopolitical risk.
- The Forex market provides short-term profit opportunities while crypto trading is rather a long-term investment option but has no guarantee of a definite pay off.
Should you choose one or both?
Obviously, whether trading Forex or Crypto is a better option is a matter of personal choice for each trader. Both markets have their advantages and disadvantages. For example, while crypto trading can bring more potential returns and involves fewer fees, Forex trading provides more stability and less volatility.
Either way, both trading practices are extremely popular these days. And, veteran traders advise novice investors to diversify their investments in order to minimize risks and increase their earnings. So, you may not have to decide between trading Crypto or Forex when you are torn between these two options. You can simply try both of them and decide which one of them suits your needs and trading style the best.
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