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Is Crypto Trading More Profitable Than Forex Trading?

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We are experiencing a digital gold rush of new technology and innovation, so it’s no surprise that cryptocurrencies have become so popular. The rise in investment in digital currencies has resulted in the total crypto market capitalization exceeding $ 3 trillion.

The rapid growth of blockchain technology and cryptocurrencies has attracted the attention of traders who do not want to miss out on opportunities to make profit.

The constant changes distinguish the crypto market from the Forex market, where exchange rates between currencies practically do not change. Forex traders are interested in profitable leverage.

In this article, we will compare Forex trading with crypto trading and discuss how to trade cryptocurrencies efficiently.

Cryptocurrencies and Forex share both similarities and differences. Crypto trading is the buying and selling of digital assets, such as cryptocurrencies, tokens and NFTs (non-fungible tokens). Forex trading means exchanging one fiat currency for another in the hope that it will rise in value. A trader can use this difference to make a profit and accumulate savings.

The mechanisms governing the valuation of cryptocurrencies and fiat currencies are similar. For example, price movements, supply, and demand play a significant role in both cases. However, the specific factors affecting these indicators vary significantly.

Cryptocurrencies, for example, operate on blockchain technology, on a distributed and decentralized ledger. Huge investments were made in this new infrastructure, and the demand for cryptocurrencies is off the charts.

Forex trading has been going on for several decades, and this is, in fact, a clear and streamlined process that has been scaled up by many financial institutions. The forces behind supply and demand in the Forex market are gigantic. Therefore any significant event can have an enormous impact on the global economy.

If you carry out technical analysis, you will notice that the original mechanisms used to analyze price charts are the same for crypto and Forex. However, one huge difference stands out: the volatility of crypto markets is significantly higher than that of foreign exchange ones.

Market Size and Structure

Cryptocurrencies support various blockchain projects, and Forex is fueling the global economy. One of the advantages that Satoshi Nakamoto created in the development of Bitcoin was a transparent ledger for fixing the ownership of the cryptocurrency. Thanks to this feature, we can easily determine the size of the cryptocurrency market.

The total market capitalization of cryptocurrencies is around $ 3 trillion. It took 12 years to reach the volume of 1 trillion dollars, and then another 11 months to overcome the bar of 2 trillion dollars. The total value of the crypto market is growing rapidly.

Determining the value of Forex is more difficult. Economists can only roughly estimate the total value of the global economy, which stood at roughly $ 80 trillion in 2017.

The Bank for International Settlements (BIS) estimates the volume of world trade every three years. The most recent report was released in September 2019, when the BIS noted that the Forex market was trading $ 6.6 trillion a day, up from $ 5.1 trillion three years ago.

Forex trading is well established: systems and mechanisms for trading on it have been around for a long time. Although Bitcoin has been around for 13 years, the ability to easily acquire it has only recently appeared.

Best and Worst Trading Pair for Both Types of Trading

When you trade in the market, you exchange one thing for another. For example, if you are buying Tesla stock, you will most likely exchange your US dollars for a TSLA.

Forex traders are well versed in this principle, so their currencies are designated in pairs. They can find the exchange rate quote for any of the currency pairs in the system. 

You don’t even need to have EUR / JPY in your account to make a EUR / JPY trade. When trading EUR / JPY, you are speculating on the movement of the euro exchange rate against the JPY.

Cryptocurrencies are still in the early stages of adoption processes. Most cryptocurrency pairs use Tether (USDT), Bitcoin (BTC), Ethereum (ETH), or the exchange’s native coins as their quoted currency.

Moreover, there are currently over 10,000 cryptosystems available. The trader can use such coins as Bitcoin, Tether, or Ethereum. For example, you first trade Ethereum and then buy the coin you are interested in.

Best Strategies for Crypto and Forex Trading

In cryptocurrency and Forex trading, you cannot rely on chance. To effectively open positions and generate income in the future, you need to have a clear strategy.

Trade with the trend

Asset quotes always move according to a trend, upward or downward. A trader can open positions in the direction of the trend, for instance, buy when it is up and sell when it’s a downtrend.

Trend change

This method is more complicated and requires basic knowledge of technical analysis. A trend reversal can be used to open new trades, but the difficulty with this strategy is that it might incorrectly identify a possible reversal.

Purchase in equal parts

The easiest way to start investing in cryptocurrencies is the long-term accumulation of digital coins with regular purchases in equal parts, for instance, investing a fixed amount in Bitcoin every month.

The advantage of this strategy is that it is possible to purchase an asset regardless of the market situation. If the price of the cryptocurrency begins to fall, then subsequent purchases at a lower cost can average the entry point,

This strategy works for investors who have a long-term vision for asset growth and see a big upside later. It is the pattern that many people see in Bitcoin.

When a novice trader asks a question about the most profitable Forex strategies, it is difficult to give an unambiguous answer to this question because each case is individual. 

However, proven Forex trading strategies do exist. All you have to do is choose one for yourself.

Scalping

It is a short-term tactic. The trades have minimal profitability and are completed within minutes (or even seconds). Scalping provides the maximum number of trading opportunities but requires technical analysis.

Intraday trading

Refers to Forex strategy for beginners. All positions must be closed before the evening. Trades are made in the interval from 5 to 15 minutes, but sometimes trades can last for 1-2 hours.

Swing trading

A foreign exchange market participant using this system holds positions for several days and profits from short-term price patterns. In the process of trading, you need to look at the bars every 30-60 minutes.

Positional trading

Following a long-term trend and increasing profits due to price changes. Typically, a long-term trader is guided by end-of-day charts. The strategy requires patience and self-discipline.

Trend trading

A simple algorithm using market directional momentum. The length of the trends can fluctuate; therefore, trades are conducted on the medium and long-term timeframes. Analysis can be performed for 2-3 time periods.

Online trading allows you to create your Forex trading strategies. There are several important components to consider when creating:

  • Tool selection. Determine which currency pairs you will trade and become experts when reading those pairs.
  • The size of your position. Decide in advance how much volume each position will have. This will help you control the risks for each trade.
  • Entry points. Develop the rules according to which you will take a long or short position in a currency pair.
  • Exit points. A set of rules will help you get out of a losing situation for you.
  • Trading tactics. Conditions for buying and selling currency pairs, considering the correct execution techniques.

How Do I Start Trading Forex?

To enter the market directly, receive quotes, and start trading, you will need:

  • Find a broker;
  • Register with him;
  • Open an account;
  • Make a deposit;
  • Download the trading terminal;
  • Select asset (s), analyze, open a position and make a profit.

The choice of a broker is a subjective matter, but there are several general rules on how to start trading in Forex, which it is advisable to follow.

What to look at when choosing a broker:

  • How many years has the broker been working in the service market? The longer, the better, preferably at least 5 years.
  • Regulation. The presence of a license from serious regulatory authorities indicates that the company is responsible for the quality of its services and is focused on long-term work. These can be CIF, FCA, MiFID.

When a broker is selected, all that remains is to register. The registration process may differ slightly from broker to broker, but in general, everything is similar: you need to provide all the basic information about yourself and contacts:

Also, before you start trading on Forex, you will have to confirm your consent to the processing and storage of data, as well as accept an agreement on the provision of services, which will spell out the responsibilities of both parties and verify your account.

How Do I Start Trading Crypto?

Making money with cryptocurrencies is not easy. Installing a reliable application and immediately getting an asset into a portfolio, as in Forex, will not work. You will need a cryptocurrency wallet (it is safer than keeping coins on an exchange), as well as registration and a verified profile on the cryptocurrency exchange.

First of all, you need to choose an exchange – for this, it is worth checking its reliability. Investigate if the exchange has been exposed to hacker attacks and how well it works.

Usually, the procedure itself is quite simple and is similar to registering on any site – you need to provide basic information about yourself and email.

Some exchanges will then allow limited use of services, but for full trading, you need to go through the KYC procedure.

Remember, cryptocurrencies are extremely volatile assets. Therefore, invest only the money you can live without and with which you are ready to part forever. For example, investing all of your savings in bitcoin at once is a bad idea that can end in disaster.

FAQ

How to start trading on the Forex market?

You need to register a trading account with a Forex broker. After that, you can start using their client software to buy and sell different currencies.

What are the main mistakes of a beginner trader?

Invest all your savings in cryptocurrency. You can’t do this – for a start, keep no more than 5-10% of your portfolio in cryptocurrency.

What is Base Currency?

When you open a deal in the Forex market, you buy one currency and sell

another, making the currency exchange. The currencies you buy

and sell make up a currency pair. For example, a pair of Euro/dollars. The first currency in your currency pair is called the base currency

What is a Market Order?

A market order is a term for placing orders for near-instant execution at the current market prices. When placing a market order, you can select “Quantity” or “Total” to buy or sell.

What is the time of operations?

Forex markets work every day, 24 hours, 5 days a week. Cryptocurrency markets not only see the same type of continuous activity on weekdays – this action extends to weekends as well.


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