Both crypto and forex markets provide high-risk investment and trading opportunities. An understanding of both markets will give you more clarity on the best option.
Making huge profits depends on how you understand the trading techniques and the methods used to apply them to your investment. Know the difference between the crypto and the forex market. Acquire some knowledge on online trading, and then dive into trading on either the crypto or forex market.
Crypto and forex markets are some of the largest markets in the world, where the average trading volume is very high. The crypto market saw many new investors during the pandemic last year. The speculative and unpredictable movement in the forex and crypto markets has new investors in search of quick profits.
The decision to trade is yours.
Understanding Crypto Trading
What is Crypto Trading?
Cryptocurrencies are an alternative to traditional fiat currencies. They are gaining acceptance as a form of payment by many large companies. Crypto prices are extremely volatile, and traders use the rise and fall in price value to speculate on them. Bitcoin and Ethereum were at life highs in November 2021.
As digital currencies go mainstream, they capture the attention of traders who are afraid of missing out on the volatile price movement of cryptocurrencies. The best US crypto exchanges are Coinbase, Crypto.com, Bisq, and Binance.US. The best app for crypto trading is Coinbase. However, it offers only cryptocurrencies and not stocks or ETFs.
The total crypto market valuation has risen to more than $3 trillion as the usage of cryptocurrencies is gaining mainstream attention. Users are flocking into crypto trading to speculate on the wild price swings seen almost every day. However, this volatility in prices has a high chance of eroding investment value, as it is extremely difficult to predict price moves.
Major Cryptocurrencies for Trade
Some of the best cryptocurrency picks, along with their prices as of January 2022, are Bitcoin (BTC) $36,900, Ethereum (ETH $2,490), Ripple (XRP) $0.6120, Litecoin (LTC) $108.100, and Binance Coin (BNB) $370.20.
Traders who do not want to risk their investment can choose inexpensive coins. The best cryptocurrency to invest in 2022 that fall under this cadre are Cardano (ADA) $1.06, VeChain (VET) $4.29, and IOTA $0.8026. They are low priced, and users prefer crypto assets that trade at around $1. Even if traders take the wrong strategy, they will not lose much on their investment.
Meme-coins are new cryptocoins that have become a part of the vibrant crypto community.
To know what cryptocurrency to invest in, you can select those cryptocurrencies that surged to new highs in 2021. The top cryptocurrency, Bitcoin, was at $68,990 in November 2021.
Best Crypto Investment in 2022
The best cryptocurrency to invest in 2022 is Bitcoin, Ethereum, Dogecoin, and Litecoin. The best penny cryptocurrency to invest in 2022 is Stellar (XLM). One of the best new cryptocurrency 2022 is Stellar (XLM), which is currently worth $0.2018 as of January 2022.
The crypto hype continues to dominate the Reddit crypto community in 2022. The best cryptocurrencies 2022 mentioned in Reddit cryptocurrency are Shiba Inu, Dogecoin, Terra, and Yearn.finance.
Buying and Selling Cryptocurrencies
Crypto currency trading is the speculation on the price movement of cryptocoins by buying and selling the crypto on a top cryptocurrency exchange or through a CFD trading account.
- Buying and selling cryptos on the best cryptocurrency exchange is to purchase or sell the coins themselves. As a first step, create an account on an exchange and buy the digital asset of your choice. For safe storage of the crypto, you may require a crypto wallet. You can sell the crypto later when prices move up. You can also convert them into another crypto or convert the digital asset into fiat currency.
- CFD trading is a contract on which you do not take ownership of the crypto but speculate on the difference in prices. A long position is when you buy the crypto and sell it later at a higher price. A short position is when you first sell the crypto and buy it later. If crypto prices move in the expected direction, you make a profit. If it fails, you make a loss.
The best app to buy a cryptocurrency for beginners in the crypto trade is Robinhood, as Robinhood crypto fees are nil. The lowest fees crypto exchanges are Binance, Coinbase, Webull, and eToro. The best crypto platform that provides a huge asset variation is Binance. Select the best crypto trading platforms that suit your skillset and financial goals. With the best crypto trading app like Coinbase and Binance, you can buy, sell and trade cryptocurrencies while on the move.
You can refer to cryptocurrency guides to understand what affects the cryptocurrency market. There are other cryptocurrency guides that will help you select crypto, such as Bitcoin, Binance Coin, Dogecoin, etc. Users can refer to the crypto trading strategy guides to gain exposure to the real market situations and the strategies to use in each environment.
- Network Consensus
- Crypto Mining
- Cold/Hot Wallets
- Decentralized Applications (dApps)
- Decentralized Finance (DeFi)
Crypto Trade: Step-by-Step Process
There are around 8,000 cryptocurrencies that are in circulation. You can dive into the crypto sphere and choose the best cryptocurrency to invest in 2022.
Select the best crypto to invest in after doing some research. To keep your digital asset safe, you require the best crypto wallet, such as Coinbase, as they are secure and easy to use.
Crypto wallets such as eToro, Binance, Kraken crypto, and Huobi are other wallets that provide users with various features and tools for trading purposes.
Choose the best crypto exchanges that provide low-cost trading services, such as Binance and Huobi.
- Buy the crypto currency on the exchange after opening a crypto wallet or an account with them.
- Choose a trading plan. Select a cryptocurrency to trade. You can use technical and fundamental analysis to analyze the market and select a trading plan.
- Acquaint yourself with risk management tools to trade and apply a trading strategy when you buy cryptocurrency.
- Users have to choose the best cryptocurrency trading platforms to trade their cryptocurrencies. It depends on their trade stakes and experience. As a trader, you can use mobile apps, web browsers, or MT4 for the purpose of trading.
- Learn to open and close your position by setting buy or sell options and stop loss to protect yourself from unnecessary risks.
Crypto Trading Strategies
The market cap plays an important role in determining cryptocurrency prices. Bitcoin’s crypto market cap is the highest at $696.52 billion. Ethereum comes second with a market cap of $297.14 billion.
Traders with limited capital prefer to invest in a new cryptocurrency. Such traders can choose low-priced crypto currencies such as Cardashift, Dogeon, and SYN City. Some of the best cryptocurrency brokers with low fees are Kraken, Coinbase, and Bittrex. Coinbase crypto broker is easy to use and has multiple crypto trading options.
You can get instant notifications on trending topics on CryptoPanic. It has various facilities to track what you are searching for.
- Day trade crypto is to purchase and sell the crypto asset on the same day. Day trading cryptocurrency is a short-term strategy that traders prefer high volatility in crypto price movement.
- Crypto trading bots help traders to buy and sell cryptocurrencies at the right time. 3Commas is a trading platform with automated software. Here trade is performed by the forex bot.
- Crypto brokers eToro and Webull are the best exchanges that charge low trading fees.
- Cryptocurrency futures enable traders to gain exposure to cryptocurrencies without actually holding the asset. It is almost a futures contract on which investors speculate on the crypto’s future prices.
Forces that Drive the Cryptocurrency Market
- Price Movement: Crypto trading depends on the supply and demand for the asset. Supply is the total number of coins released. It also takes into account the number lost or destroyed.
- Market Capitalization is the value of the total coins in existence.
- Crypto News Events: Regulatory action, security breach, and economic downtrend are major news events that hurt crypto prices.
- Number of Users: Users prefer coins well portrayed by the public and their usage in e-commerce payment systems. When the number of users increases, it drives up the particular crypto prices. An example is Bitcoin.
- Understanding Forex Trading
What is Forex Trading?
Forex trading is selling one currency for another. Traders buy and sell foreign currencies at an agreed price. A foreign transaction takes place when you travel abroad, and you need the local currencies of the country you travel to. Traders make use of the price movement to make profits.
The forex market is run by central banks across different time zones and driven by the supply and demand for the currencies. Traders sell one currency and buy another as forex exchange.
Major Currency Pairs for Trade
Forex trading is done in pairs. Major currency pairs are EUR/USD, GBP/USD, USD/JPY, USD/CHF, EUR/GBP, EUR/CHF, and GBP/JPY.
The forex market is open 24 hours a day and five days a week. Investors refer to forex charts and update themselves on the relative price movement of various currency pairs.
Forex trading guides give a better understanding of the foreign exchange market. Forex trading strategy guides, such as forex signals and forex trading courses, provide basic knowledge for small traders. If you are new to forex trade, refer to these guides before you start trading on the forex exchange.
New traders should learn about forex terms and acronyms before they start trading. You need the right knowledge to trade profitably.
- Currency Pair
- Going long, going short
- Forex exchange
- Foreign currency exchange
Buying and Selling Forex Currency Pairs
Traders should select the best forex trading times depending on the region in which they live and their trading style. Beginners should prefer forex hours that show more price movement.
Invest small amounts when you start to learn forex trading. Market analysis using forex trading signals helps traders make a profit while trading. Forex news is important for traders, as they provide real-time updates on the latest news trends.
Beginners prefer forex demo accounts on trading platforms that come with customer support and opportunities to practice successful trades.
The best forex trading platforms are IG, Forex.com, CMC Markets, and eToro. The forex brokers for beginners are TD Ameritrade and Markets.com.
Be updated on daily pivot points to understand the market trend. The best US forex brokers are IG, CMC Markets, and XTB Online Trading.
Forex currencies are traded in pairs. Traders usually refer to the live trading charts to understand the current trend in the forex market. Learning forex trading is important for beginners and market veterans too. There are forex tools and software that are constantly evolving. Forex trading for beginners begins with learning how to trade on currencies.
- Fx trading is done in three ways. The spot market, the forward market, and the futures market. Forex traders prefer to trade on the forward and futures markets for speculation and hedging purposes.
- The best time to trade forex is between 8 am and noon when the London and New York exchange timings overlap. As economic events play an important role in forex currencies, you can watch forex factory news. It gives a brief glimpse of the performance of economic activities across the globe.
- The forex Reddit community is growing, where beginners raise queries and get their questions answered. Beginners in forex trade should learn to read the free forex signals as they are available online for free. Acquire knowledge and skills to analyze data and create forex investing strategies. It will improve your profits.
- The foreign exchange trading market has high liquidity and high volatility. Choose forex trading hours that show high movement, especially during the early trading hours. Fx news and events play a major role in the price movement of a currency pair. Daily forex provides constant updates on market activities and forexnews, along with free forex signals.
Forex Trading Strategies
Forex for beginners starts from learning the trading strategies. Day trading, swing trading, and position trading are some trading techniques commonly practiced in the forex market.
- Manual Trading: Traders apply fundamental analysis or technical analysis or a mixture of both to make decisions on their trade. Forex analysis is to identify patterns from live charts and predict the price movement of currency pairs. Trading based on a personal decision is called manual trading.
- Automated Trading: But some consider algorithmic trading to be better. Automated trading is done through bots, in which the bots identify trading opportunities and make decisions with speed and accuracy. Bots or Expert Advisors (EA) are programmed to carry out trades automatically and manage trade on behalf of the trader.
Best Forex Strategies for Trading
There are a number of forex trading guides available to give clarity on your investment strategies and take the right approach on currency pairs on the forex currency exchange.
- Forex Pips: It is a tool of measurement that refers to the small price movements on a currency exchange rate. It indicates minor changes up to four decimal places.
- Scalping Forex: It is a short-term strategy that yields good profits. But traders require discipline while trading and should learn to apply their technical knowledge on forex trading platforms.
- Forex day trading: It is a short-term strategy popular among small traders. A forex day trader must develop a good trading plan. Risks must be kept in check, and traders should have a strategic exit plan.
- Forex Bot: it is automated trading or algorithmic trading. Here trading is automatically performed according to programmed instructions.
- CFDs are risky as it involves leveraging. There is a high risk of losing money under this strategy, as it uses complex instruments due to leverage. Almost 64.95% of investors lose money in CFD trading.
Forces that Drive the Forex Market
- Price Movement: Forex trading depends on the supply and demand forces. Supply is under the control of central banks.
- Volatility: The central bank undertakes various measures that affect the currency’s price, such as quantitative easing.
- Economic Events: Inflation, employment numbers, and GDP are major economic events that affect currency prices.
Common Terms Used in Both Crypto and Forex Strategies
- Spread: The difference between the purchase and selling price quoted for a cryptocurrency or currency pair is called “spread”. You can open a long position to buy it or a short position to sell it.
- Lot: Trading is usually done in lots. It is trading in standardized batches of cryptocurrencies or currency pairs. Lots may be just one unit of the base crypto, while some lots are bigger.
- Leverage: Leverage is to gain access to large amounts of cryptocurrency/currency pair without paying for its full value. Instead, you pay a small deposit called margin. Leverage multiplies profits and amplifies losses, so you should learn to manage your risk.
- Margin: Margin is the initial deposit you require to open and manage a leverage position. Margin requirements change according to the broker and the trade size.
- Pip: It is a one-digit movement in the fourth decimal place of the crypto or currency pair.
Similarities Between Crypto and Forex Trading
Both crypto and forex markets have some basic similarities. The price movement of both crypto and forex markets is driven by market forces, demand, and supply. Traders require a thorough understanding of the markets they are trading in. It is easy for both beginners and professionals to trade on the forex exchange. Traders prefer short-term trading in both asset classes and rely on technical and fundamental analysis.
Crypto vs. Forex Trading
Though it is easy to say that both types of trade can make you rich, it would be wiser to reply that only those with exceptional trading skills and those willing to lose money can make profits. It is a rocky highway that traders must cross to reap the rewards of their trading strategies. Statistics show that most forex and crypto traders lose large amounts of money.
- While forex trading has been in practice for a very long duration, crypto trading is relatively new.
- Crypto trading is associated with high volatility and higher risks than a forex trade.
- The crypto market does not have a central regulatory body, while the forex market has regulatory authorities to govern its movement.
- Forex trading is easier to understand than crypto, which runs on the latest technology such as blockchain and smart contracts.
Crypto or Forex: Which is Safer?
- Cryptocurrencies are decentralized and not backed or issued by a central authority. The central bank or the government is not involved in the issue of crypto. It runs on a network of computers.
- Fiat currencies are issued by a central authority, such as the government or the central bank. The regulatory body in the UK is the Financial Conduct Authority (FCA). The Commodities Futures Trade Commission (CFTC) and the National Futures Association (NFA) are the regulatory agencies in the US.
The forex market is less volatile and has a regulatory authority to monitor its activities.
Is Trading Crypto More Profitable?
Investing in cryptocurrency is a risk that every trader should bear in mind.
- Sudden and high volatility rocks the crypto market, challenging traders, which involves high risks and high profits too.
- Platform malfunction is a common plight faced by crypto traders, especially when almost every trader wants to close their position, creating a stampede leading to cryptocurrency platforms malfunctioning.
- Crypt trading is more profitable than forex, but the risks associated with crypto are higher.
Understanding Taxes on Crypto and Forex
The Internal Revenue Service (IRS) treats cryptocurrency as property. All transactions are legally taxable. Crypto may be received as payment or by mining, and such income is taxable.
The Commodities Futures Trade Commission (CFTC) and the National Futures Association (NFA) are two regulatory authorities in the US.
The Financial Conduct Authority regulates crypto in the UK. The Forex Capital Markets Limited (FXCM) is another regulatory body in the UK.
Forex trading in the UK is free. Profit from forex trading is treated as Capital Gain, and tax has to be paid. If you buy and sell cryptocurrency as an investment, you have to pay capitals gains tax.
To Summarise Crypto and Forex Trading
Crypto and forex trading adds diversity to a trader’s portfolio.
Cryptocurrency is still in its nascent stage. Trading opportunities are new, and market participants are significantly lower than in the forex market.
The forex market is more stable, less volatile, and has a regulatory authority to govern them. Profits are much lower in the forex market, as market swings are lower.
The structure and trading size of both forex and crypto trading are different. It is best to diversify your portfolio to remain profitable, both in the crypto and forex market.
Protect your profits and limit your losses. Traders should apply trading strategies that will protect their capital invested.
The trader has to decide on the type of trade, the investment amount, the trading techniques, and his own risk assessment abilities before entering a trade on the forex or crypto markets.