The world of trading is pretty diverse. Although forex trading and trading cryptocurrency do have a lot in common, there are several fundamental differences between these two complex activities.
Involvement of the Middleman
Firstly, there are organizational differences. While forex trading has been around for a while and grew into a massive and strictly regulated and supervised industry with multiple mediums involved, crypto trading is still a very new phenomenon with a relatively simple organization and a few middlemen involved.
The involvement of numerous brokers, exchanges, and other third parties can be beneficial and expensive at the same time. And the influence of institutional investors in forex trading is also a big deal – traders have to compete with banks and other large organizations which makes the process much harder.
Although carefully regulated and curated, forex trading can become a cost-prohibitive business, considering all the fees involved. This makes the entry point harder, whereas you can jump into trading crypto with minimum investments. It is relatively cheap and easy to start trading crypto and lots of platforms will provide you with a quick and easy start.
Secondly, liquidity available in trading forex overbalances liquidity in trading crypto, especially when you take a look at altcoins. Forex boasts a high daily turnover with many pairs including minor currencies available at any given time.
This also ensures that large forex trades will not be overcharged, but with crypto trading and it’s low liquidity factor, the situation is not that certain.
Thirdly, forex trading is considered to be more secure than crypto trading. However, this statement is rather controversial as it heavily depends on your trading strategy and ability to handle the risks. But the main concept is yet quite expressive: although by trading forex you can be almost sure to make a stable average profit, crypto trading can easily bring you up to 70% gains or nothing at all.
The crypto trading industry is still very new and thus the risks associated with it are a lot higher. Quite often crypto exchanges get hacked and the whole funds’ management process requires a certain amount of education. Blockchain transactions are irreversible so it is very easy to lose everything if you do not know the basic rules.
The forex trading industry, at the same time, is very well regulated and the authorities offer fraud protection and a higher level of security.
And finally, there is the volatility factor. Cryptocurrency is famous for its volatile nature which is a blessing and a curse at the same time. Volatility can be beneficial thanks to small differences in exchange rates but it doesn’t contribute to the liquidity situation.
Crypto volatility also contributes to the situation when large, one-day swings can happen, making it a lot easier to buy low in the morning and sell high in the evening.
Which One Should You Choose?
Choosing between forex and cryptocurrency trading can be tricky as they both have their pros and cons. Forex trading is more stable and regulated, but the possible huge returns of crypto trading often become a key factor when making the choice.
Before you make any decisions, it is essential to learn a little more about both of these processes and websites like Learn 2 Trade can come in handy.
Learn 2 Trade is a platform dedicated to providing crypto and forex traders with all the information they need to kick start their trading career, including an in-depth understanding of financial markets.
The team of experts with trading experience in all major financial markets like cryptocurrencies, commodities, currencies, and indices will provide you with insights regarding fundamental and technical market factors. From help with choosing the right Forex broker to explaining the basics of ins and outs of the crypto market, Learn 2 Trade will guide you all the way regardless of your previous experience.