How does Forex trading work?
The Forex market is over 50 years old. It carries out real-time currency trading 24 hours a day, five days a week. Daily trading volume reaches $5 trillion. Everyone is involved in the trade: banks, traders, investors, organizations and many others.
Although Forex has been around since long before the Internet, it was the global network that brought the market to its current size.. Anyone interested can trade currency in Australia, Alaska or Antarctica.
Traditional currencies are directly dependent on the state apparatus which, in fact, issues them. Therefore, those who trade them need to keep abreast of events and follow the political and economic news.
Trading on the crypto markets
Cryptocurrency trading is a much younger form of entrepreneurship and earning. This is not surprising, since the first digital coin, bitcoin, did not appear until 2009. Crypto-exchanges, on the other hand, saw the light even later.
Today, cryptocurrency trading occupies an important place in the process of exchanging assets and takes place 24 hours a day, 7 days a week.. Intraday trading volume on peak days exceeded $500 billion.
As in the case of Forex, crypto markets involve a variety of participants, from private traders to institutional investors. And the number of people involved continues to grow on both sides.
What other similarities are there between trading traditional and digital currencies?
Similarities between Forex and cryptocurrency trading
The main similarity is that in both Forex and crypto exchanges transactions are made with assets that pretend to be money in one form or another;
The second thing that can be highlighted is that both markets are characterized by quite strong volatility. In cryptocurrencies, it is preserved by itself, but in fiat money it is rather achieved through the effect of leverage. Think about it, how often do you see the dollar change by tens of percent in a day?
The third is the enormous role of the Internet in trading both assets. Cryptocurrency in general exist only in virtual space, without any material emphasis. The currencies issued by central banks can, of course, be felt, but the development of Forex to its present size has also been achieved only by the Internet.
And what are the differences in trading cryptocurrencies and traditional fiat?
Differences between Forex trading and crypto exchanges
Cryptocurrency and traditional fiat trading schemes are different. Transactions with the former are carried out on cryptocurrency exchanges. The requirements of each particular site will be different from their counterparts. In addition, the operation of the same exchange in different countries may include different requirements, which traders will have to put up with.
Forex trading takes place through a broker. Thus, here is added a link in a chain of intermediaries, who, of course, have to pay additional fees.
The reaction of cryptocurrencies and conventional public money to various shocks in the economy is also very different. One way or another, the former are much less susceptible to external influence compared to the latter. Moreover, sometimes different economic processes can lead to diametrically opposite results in these assets. For example, an increase in interest rates is a catalyst for the growth of the national currency and leads to a fall in the price of cryptocurrency. We can also note the differences associated with the inflationary and deflationary nature of individual cryptocurrencies and fiat money.
There are also differences in the attitudes of authorities in specific countries toward cryptocurrencies and Forex. For example, in China, no one forbids trading currency. But cryptocurrency there is banned at the official level. This is easier in Russia. It is possible to trade in cryptocurrencies. However, it is not possible to pay for goods and services. Forex, on the other hand, is available. But again, there are some problems with the fact that there are not many dealers who are officially authorized (licensed by the Central Bank) to provide access there.
So, what to give preference to? Or maybe it’s better to combine Forex and cryptocurrency trading?
Which is better to choose?
Everyone will answer this question himself. It all depends on your character, the amount of money and the desired result. Cryptocurrency can allow you to raise the value of your deposit in a relatively short period of time. It is not necessary to be engaged in margin trading. Although individual enthusiasts may try to take the risk.
Important feature: Trading currencies involves leverage. Otherwise, it becomes a kind of conservative strategy to preserve capital. It is no secret, for example, that if you buy American dollars for Turkish lira, you are at a premium, because inflation in Turkey is higher than in the United States.
On the other hand if you want more protection from the government it is definitely easier to achieve that with traditional currencies. Cryptocurrencies can no longer be called the “Wild West,” as the U.S. Securities and Exchange Commission (SEC) shoves its claws deeper and deeper, but they are still less regulated. This is both because cryptocurrency is a young asset class and because the nature of digital currencies is different from traditional currencies.
In any case, before you start trading, understand all the intricacies of the process. Immediately and with little preparation you should not plunge into the abyss of trading, margin trading and other things. After all, if you do so, everything will end very quickly and miserably for you. Also, under no circumstances should you trade with your “last” money, and even less so with the money you received from a microcredit organization at huge rates, but only with the money that you are willing to lose without too many negative consequences.
Thus, Forex and cryptocurrencies present a great opportunity to make money. However, if you start trading without proper training, you will most likely lose your hard-earned money before you even know what’s what.
This material and information contained herein does not constitute personal or other investment advice. The opinions expressed herein are those of the author, research portals and experts and do not necessarily reflect the views of the publisher.