If you are planning to get started with trading and want to explore markets like Crypto and Forex. Then you must be wondering what the difference or similarities between these two are.
Crypto and Forex are said to be two of the riskiest yet profitable markets for traders. But thanks to the huge profit, both markets get huge attention compared to the other markets.
So, let’s just go ahead and explore what these two markets have to offer us and how they are different from each other.
Difference between Crypto Trading vs Forex Trading
Number of Available Instruments:
One of the major differences between the crypto and forex markets is the number of available instruments. The forex traders usually trade in currency pairs like EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD and others. However, the options are limited only.
But on the other hand, there are more than 11,000 different cryptocurrencies are available. Even, the number of cryptocurrencies is growing too much that it is hard to keep the count.
But there are only a few coins that get actively traded which includes Bitcoin, Ethereum, Litecoin, Ripple, and others.
In short, the crypto market offers you much more options for trading. While the forex market has a limited number of instruments only.
Liquidity:
When it comes to liquidity, the forex market is an extremely liquid market. The forex trading volume exceeded 6.6 trillion back in 2019. As a result, it will be super easy for you to buy or sell your favorite currency pair. This makes it easy for you to get out of the trade at your desired price.
But the same doesn’t go with most cryptocurrencies. Of course, if you are trading in the most popular coins, this won’t be an issue. But if you are going to trade in less known coins, then you may not get to exit at your desired price.
Volatility:
The crypto market is more volatile compared to forex. Even, forex market stays stable. If you look at any cryptocurrency market, you would see ups and downs only. Even the smaller cryptocurrencies can move up or down hugely.
But such moves are hard to see in the forex markets, and it only happens in the exotic pairs. Hence, it becomes easier for you to control risks.
Profit Potential:
Crypto markets gained huge popularity as they promise to offer huge profits. If you are taking a huge risk, you are going to enjoy a great profit. But it is important as a trader to choose the right cryptocurrency to invest in.
Even, the forex market also offers huge profits. But you must increase your forex trading potential using leverage. But if you face loss, you are going to lose a lot of money. So you have to be careful with your trades.
Similarities between Crypto Trading vs Forex Trading
Decentralization:
Both crypto and forex market is decentralized. This means there is no central regulation exist on the market. However, this doesn’t mean that the market is unstable. You just have to be careful with your investments.
Similar Market Operation:
Both the market has a similar market operation. Both work on the concept of basic supply and demand. If there are more buyers than sellers, the price will go up. In case if there are sellers, the price will go down.
Also, if there is any negative or positive news out there, the price of both cryptocurrencies and currency pairs is going to go up or down.
Trading Account:
To get started with crypto or forex trading, you will need to have a trading account. Also, you will need a computer or 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 a straightforward job, 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 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 favorite currency. Similarly, you can place sell orders from the same market.
Conclusion:
So that was all about the differences and similarities of crypto and forex market. 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.
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