Dynamics of Forex Vs Crypto Trading: Due to the decentralisation of markets since 1970, the trading scenarios have also changed. Today, we hear new terms in trade markets that are foreign exchange aka forex trading and cryptocurrency trading.
What is Forex & Forex Trading?
The term Forex is broadly named as Foreign Exchange, i.e. it is a market for the exchange of foreign currencies. And Forex Trading employs buying, selling, exchanging,& determining the current prices of any currency in the global market.
What makes a Forex Market?
Forex markets consist of Big financial firms like international banks, big insurance companies, and large economic shareholders at a global level like the World Bank and IMF. Here in Forex Trading, the banks work as a dealer who deals in foreign currencies exchange.
The currency trading rates and prices are determined by the interest rates of different countries where the Forex market also serves as the arbitrator in maintaining the sovereignty of the currencies of different countries.
Here, the currency trading can be understood by a simple example: suppose India want to import oil from the US, then it will have to pay the money in American Dollars to the USA even when it deploys its internal transactions in INR only. So here, the role of Foreign Exchange Market comes into play as it maintains the respectful floating value of India`s currency in international markets.
So with the above example, it can be said that currencies exchange and trade happens in currency pairs, e.g., EUR to USD or USD to JYN.
How to Trade in Forex
For beginners, it is a mind-blowing question, but here is the best way to trade in the Forex market. As a beginner, one thing has to understand that there are a variety of things to trade in the Forex Market like commodities, currencies, energy, metals CFD`s, stocks, and indices etc. One has to choose judiciously among these.
The Process of Investing in Forex
Starts with getting a licensed broker who can help us trade in the market. Here is one of the top brokers who are available to help you invest in foreign exchange markets.
With the help of these market leaders, you can invest your money in trade. Besides, all the above-mentioned assets, the most preferred one by small investors are trading in foreign currencies where they can earn or get benefited by two methods, i.e. either earning interest difference between two currencies or making money by a change in exchange rates.
Forex trading can be started from home: The best way is to buy the currency with a higher rate of interest & shorten it with a currency which has a lower rate of interest.
Forex Trading Strategies
If someone wants to churn maximum profit out of small or medium investments, he/she has to deploy the best Forex trading strategies that work for him/her.
Here are some simple investing strategies that could be followed:
- Price Action Trading: The trading is speculated by time indicator. i.e. the investment is made on taking into consideration the previous economic activity.
- Range Trading Strategy: This strategy is employed with oscillators like commodity channel index, stochastic, relative strength index etc.
- Trend Trading Strategy: This strategy is also somewhat like price action trading. By analysing short to medium time spans trends, multiple time frame economic fluctuation, one can quickly get the idea of where to enter.
- Position Trading: In this strategy rather than short and medium-term variations, long term scenario like weeks, months or years are taken into consideration. This strategy can be used in both Forex and Stocks.
- Day Trading Strategy: This strategy works best for those who want to invest and get the output on the same day whatsoever. This trading strategy, trading time ranges from minutes to hours only.
- Carry Trade Strategy: The most used and favourable for both beginners and expert investors as one can easily get profit from the difference in interest rates of different currencies by investing in low yielding and landing into high yielding currency rates.
Forex Trading Platforms
With the advancement of the Internet, the best trading software is Meta Trader 4, developed by MetaQuotes Corporation.
Now as you have gone through the Forex Trade, its terms and techniques’ to invest and trade, one can see that there is a growing trend in searching about the prospect of investing in Cryptocurrency past 2009.
What is Cryptocurrency?
Cryptocurrency is a synonym of pseudo currency, i.e. one cannot see it as paper currency. The ownership information is saved in a computer database in the form of strong cryptography. The ledger in which the information is saved is also known as a blockchain. You must have heard of a term Bitcoin. This was earlier released as an open source-software which later on turned into Cryptocurrency.
How to Trade Cryptocurrency?
As stated earlier Cryptocurrency is a pseudo currency, so before planning to trade in it, one would have to have a digital wallet and an exchange to trade. Now there are primarily two types of wallets, e.g., owned and custodian (works as a banker too.)
Wallets are further categorised as online, offline, Android, hardware and desktop wallet. These wallets stores different or same type of bitcoins depending on their design technology. With the help of these wallets, one can buy, store, sell or exchange Cryptocurrency.
Cryptocurrency Trading Strategy For Beginners
As the Cryptocurrency is highly volatile, one has to be very careful before investing. So here are some simple techniques to follow before start investing.
- Long term Holding: Due to the volatility of the Cryptocurrency, this method is not recommended by experts, as this currency has witnessed major tops and falls from its inception. In this method, one has to be a bitcoin and hold it for months or years to get the desired gain, but that is not always fruitful as some may end withdrawing at low turnout even after years of holding.
- Day Trading: This strategy is used to get the actual benefit of investing in Cryptocurrency as one can get desired output by investing multiple time in a day trade and get small positive yields that sum into a big bonanza.
- Scalping: This is the most practised technique in Cryptocurrency investing. This technique is somewhat like day trading. The only difference is that it turns out to be fruitful only when it is played on high volume. One can extract the profitable turnout by investing significant volume and measuring minute to minute market fluctuations.
- Swing trading: This strategy is considered as ideal for beginners as this incorporates slightly long time investment holding compared to day trading and scalping like for around one week. One can get 10-20 per cent growth within one trade cycle, even with small or medium investment.
Bitcoin trading platforms: There are several bitcoins trading exchanges, e.g., Kraken, Binance etc.
Conclusion – Forex Vs Crypto Trading
After discussing the whole about Forex Trade and BitCoin Trade, we have reached on the conclusion.
There has been some pros and cons of each trading system which are shown one by one down below.
Pros of Forex Trading
- It is centralised, so no one has to worry about the system glitch. The invested money is not lost into any black hole; instead, everything is on record.
Cons of Forex Trading
(a) One will have to make prior speculations & the risk to yield calculations before investing in it as this market is less volatile compared to the cryptocurrency trading market and its fluctuation depends on past trends.
Pros of BitCoin Trading
- Easy to invest, and one can start with a small chunk of money and draw substantially huge returns.
- As it adopts blockchain technology hence user details are kept secret, chances of thefts are significantly less.
Cons of BitCoin Trading
- This currency is highly volatile; hence no one knows when profit turns out into loss.
- This currency is not centrally controlled; therefore, one never knows from who to whom the bitcoin is transferred.