Both crypto and forex trading has its own set of pros & cons, which needs to be understood, before jumping into any kind of transaction, as proper knowledge of the current trends can help investors derive the maximum advantage and mileage. Let’s begin by understanding the basics of forex and crypto trading, thereby delving into the complexities involved in it, which help an investor carefully pick the best out of the two, depending upon his/her personal preference or liking.
Basics of Cryptocurrency Trading
It involves buying and selling of digital currencies or crypto assets via a digital wallet and through a crypto payment processor or payment gateway. One can buy virtual real estate, settle old debts, pay rents, hotel bills, medical expenses, buy insurance plans and drugs with cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Ripple, USDT, Cardano and Dogecoin.
Basics of Forex Trading
It is the online trading (buying & selling) of fiat currencies or foreign exchanges. In order to trade in forex, you need to open a trading account, and you’re all set for a seamless forex trading experience.
What is involved in Crypto Trading?
All cryptocurrency transactions run on Blockchain technology, by using the blockchain payment gateway system for making payments to vendors. It basically uses encryption technology to maintain the confidentiality or anonymity of any transaction.
Cryptocurrencies are generated through virtual mining of coins, and Bitcoin is the most popular and widely used digital currency, followed by ETH, LTC, Ripple, Solana and Cardano. Crypto is not only about buying and selling virtual currencies, but you can also pay for goods and services through cryptocurrencies, provided the seller accepts it.
Cryptocurrency is relatively younger and more volatile in nature than foreign exchange. Therefore, a majority of ‘old school’ investors prefer investing in forex or fiat currencies like USD, EUR & GBP. Due to the dynamic nature of cryptocurrency the prices change and vary dramatically in a very short time frame. It can be both beneficial, as well as risk for investors, traders and merchants, depending on the prevailing situation. On the contrary, it offers great opportunities for making short-term and instant gains, rather than waiting for a long time. It can also result in substantial losses.
What are the Main Aspects in Forex Trading?
Forex or foreign exchange is the practice of buying and selling different fiat currencies in the global marketplace. As per credible statistics, it (forex) has a daily trading volume of approximately $6.5 trillion USD, making it the largest financial market for liquid money transactions. It operates through a 24 hours/day window, and on a five and a half days per week basis. FYI, forex trading is highly flexible, allowing merchants and investors to buy & sell fiat currencies from all over the world. Some of the most profitable currency trading pairs are USD/GBP, USD/EUR, USD/JPY & USD/AUD. Forex is also paired with cryptocurrencies for realizing better profit margins on a short notice.
The key technicality of forex trading is to gain substantial profit by buying a currency at a cheap rate, and thereby selling it off at a comparatively higher rate, thus making easy profits. If you’re able to make a proper prediction about the market, preempting any particular situation that may impact currency prices, you can definitely be successful in forex trading.
Forex investors and traders use a variety of techniques for improving their scope of earnings, simply by conducting a market analysis, technical study and fundamental research, by following the global market trends and statistics.
Pros of Forex Trading
High Liquidity Market – As there’s a high liquidity in the forex market, it is quite easy to buy & sell fiat currencies, without creating a dramatic influence on the market’s total valuation or price.
Scale of Market – Because of such a big market scale, traders can always expect to find buyers and sellers of different currency pairs in the global forex market. This makes it easy for all to start and close a trade, also minimizing the chances of slippages or fall.
Leverage – Traders and investors can significantly enhance their chances of making profits by using leverages, which actually enables them to trade with more liquid money than what they actually have in their existing account.
Regulatory Market – Government approved and accredited organizations such as the Commodity Futures Trading Commission (CFTC) in the US and Financial Conduct Authority (FCA) in the UK regulate the forex market through a foreign exchange regulation act called FERA. This is to protect investors from trading malpractices and online frauds.
Pros of Cryptocurrency Trading
- One of the biggest advantages of crypto trading is the decentralized nature or system, which keeps it free from regulations initiated by centralized bodies like banks and government finance departments. As cryptocurrencies are NOT subject to standard restrictions and limitations unlike fiat currencies, investors and traders enjoy the flexibility while performing transactions.
- Merchants and individuals can buy & sell cryptocurrencies maintaining 100% anonymity, as names or addresses are neither recorder, nor revealed. This is why a lot of online traders, brokers and investors are interested in crypto transactions.
- In spite of the cryptocurrency market being notorious for its extreme volatility since its inception, it also has the potential of offering significant returns and profit margins to investors, irrespective of its volatility.
Having known the differences between these two types of currencies, it becomes easier to understand that a majority of ‘old school’ traders prefer investing in forex, while the newer generation of investors are more attracted towards cryptocurrencies and the return it generates. Both have their pros & cons, with forex providing access to an extensive liquid market, whereas crypto provides the benefits of complete privacy and decentralization. The cryptocurrency market is volatile, with NO federal government regulation
As an online or virtual trader, you need to assess your long-term financial goals, and thereby choose a particular currency that you’re comfortable trading with, and fully understand the technicalities. This helps in generating the desired revenue and margins. So, perform an in-depth research, and partner only with trusted brokers, crypto exchanges and payment gateway systems.