Home Crypto Forex vs. Cryptocurrency Trading: Explained In Detail

Forex vs. Cryptocurrency Trading: Explained In Detail


There are a few different markets available for trading, there is the Forex, Stocks, Commodities, Indices and then there are Cryptocurrencies. The most popular for retail traders is by far Forex trading, but with the rise in popularity of cryptocurrencies, many brokers are now picking them up as additional tradable assets, and they are quickly becoming quite popular to trade, especially as they are tradable over the weekends while the main forex markets are closed.

So the decision now is which of these assets is right for you and which ones should you trade. We are going to be looking at some of the advantages and disadvantages of both of the asset types so that you can work out which one would be better suited for you as a trader. Before we get into that, let’s take a look at what Forex trading is and also what Cryptocurrency trading is.

What are the forex markets?

Forex is simply the exchange of different currencies around the world. It is the world’s largest trading market with a trading volume of over $5 trillion which is a lot of zeros, in fact, it looks like this $5,000,000,000,000, so a pretty large number. The markets contain a lot of different things, it includes financial institutes, banks, business and retail traders trading from home, it is a constant exchange of currencies between different people and organisations at different prices.

In order to trade in the forex markets you need a lot of money, thankfully a lot of brokers have now stepped in to make it accessible and easy to trade for retail traders. Normally, a person would put up a currency for a price and then someone else would come along and take the trade, but now that brokers have stepped in, they act as a kind of middleman, making it easier to place smaller trades. The markets are open 24 hours a day which again makes it very accessible, they crossover the weekends and on some holidays but otherwise they are open all year round.

The forex markets can move a lot and very quickly, different currency pairs have different characteristics and as time goes on, they all change in terms of their liquidity and volatility, it is this volatility that makes it such a promising endeavor when it comes to making profits, profiting on the movements up and down, forex trading is becoming more and more popular as the years go on due to its accessibility.

What are the cryptocurrency markets?

The ability to trade cryptocurrencies is very new, in fact, so are cryptocurrencies as a whole with the first coming out around 15 years ago, the ability to trade them about 10 years ago, so it is a very new market and this is something that a  lot of people are wary about, but at the same time a lot of people are excited about.

The markets are constantly growing and also growing in popularity as more and more coins and tokens come out and also more brokers take up cryptocurrencies as one of their assets. The market is open 24 hours a day 7 days a week and pretty much never closes throughout the entire year, so they can be traded at any time which is a real pull for many traders. The cryptocurrency markets are extremely volatile, they are not regulated at all so they can be manipulated by those that hold a lot of the coins, the markets are far less affected by news events and world events, however, they can be affected by news within the cryptocurrency world.

There are of course a number of different similarities between trading forex and trading cryptocurrencies, the first and most prominent thing is one of the ways that we actually trade. The majority of trading of forex and cryptocurrencies are done through brokers, furthermore, a lot of them are done through the same brokers, brokers offering cryptocurrency trading will often also offer forex trading, they use the same trading platform and so the methods of actually putting on a trader are almost identical. There are of course dedicated cryptocurrency exchanges, but for actual trading, they can be done on the same platforms.

Both forex currencies and cryptocurrencies are offered as pairs, for example, EURUSD is the Euro and US Dollar, BTCUSD is Bitcoin and the US Dollar, in order to trade you are basically trading the exchange rate between the two, which is done in a very similar way. Both the forex markets and the cryptocurrency markets are made up of institutions, businesses, and individuals, so in that regard, they are very similar to each other.

What are the differences? 

Having said that, there are of course some differences between them, one of those differences is the fact that cryptocurrencies can also be traded on dedicated exchanges, within these exchanges they have their own ecosystem, so you are only trading between the people on that exchange rather than globally as you would with forex. Another difference is the liquidity, forex is massively liquid with trillions going through it each day, when it comes to cryptocurrencies, there is a lot less liquidity, due to this there can be a lot more violent movies or larger tends than you would get with forex, this is why it can be so hugely profitable and yet so dangerous to trade at the same time.

The other main difference is the fact that cryptocurrencies are decentralised while the currencies in forex are all based on the governments and countries that use them. News events from the UK can have a massive effect on the GBP currency, while real-world events can of course affect the cryptocurrency markets, the effects that they have will be much smaller in size.

So those are some of the similarities and differences between forex trading and cryptocurrency trading, which one is right for you will be a decision that you will need to make. Consider The risks that come with them, far higher volatility on cryptocurrencies, more choice on forex trading, and the fact that you can often trade both on the same account depending on your broker, so you can do a bit of both, but just be sure that you are prepared and that you have some risk management in place should you consider doing this.


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