Similarities & Differences Between Forex & Crypto

forex trading

 

It’s no secret that cryptocurrencies like Bitcoin are at the forefront of the trading conversation nowadays. Within a few short years, crypto has risen to become one of the foremost assets on the market. Many people see crypto as a sort of new-age forex, except the currency being traded is entirely digital.

If you’re an experienced trader who’s deciding to branch out into either forex or cryptocurrency or a beginner who needs a bit of background on both assets, then you’ve come to the right place. Today, we’re going to take a look at the similarities and differences between crypto and forex, and the impact these will have on a trader.

History

One thing that we can look at is each asset’s history. The foreign exchange market is one of the oldest global exchange markets in the world. Forex trading helped stabilize currency exchange rates and bring structure to a growing global economy.

Forex has been around for hundreds of years, which is why putting it beside crypto is so interesting. Cryptocurrency has been around just a little over a decade but has already established itself as a force to be reckoned with. Bitcoin, the first truly decentralized cryptocurrency, was created in 2009. There are now around 6,000 cryptocurrencies being traded today, a stark increase compared to crypto’s humble beginnings.

They have similar trading strategies

Trading any assets can be difficult. While you can’t always control how the market moves, you can control how you trade. Cryptocurrency and forex trading make use of similar strategies, which is why it’s generally easy for a forex trader to start trading in crypto and vice versa.

Generally, the difference between an amateur and a successful trader entails a few key strategies. The first is solid planning that matches the trader’s lifestyle and personality. The second is learning from mistakes, especially after disappointments or losses.

The third is controlling emotions, which is particularly important in a volatile market like cryptocurrency. And fourth is having a good risk management system — essential for any trader.

They’re exchanged differently

One of the most important things about trading and investing is understanding the platform. This is where forex and crypto trading are particularly different.

Foreign exchange trading is an over-the-counter (OTC) market. This means that rather than coursing through an exchange, trades are made directly between two parties. This allows trades to continue 24 hours a day.

Contrast this with cryptocurrencies, which are usually transferred through an exchange. Although crypto exchanges come in different forms and serve different purposes, they ultimately function as straightforward trading platforms.

Exchanges act like brokers between sellers and buyers of crypto. They’re easier to navigate, especially for beginners, and mean that assets are less prone to cyber theft.

Similar indicators and chart patterns

Both forex and crypto markets are influenced by simple supply and demand. When there are more buyers than sellers, prices move higher. When the opposite is true, prices go lower.

Because of these similar principles, forex and crypto have similar indicators and patterns, which makes transitioning from one to the other fairly simple to do. For both assets, a good trader should know and understand basic chart patterns in order to be able to make the right decisions about trading.

Technical analyses of the markets are based on these chart patterns, and there are no “best” patterns. There are patterns more suited to a stable market, while others will benefit traders working in volatile markets.

The important thing for both forex and crypto trade is that traders understand these patterns and how they can benefit whichever asset is being traded. Without this understanding, it can be easy for traders to fall behind, and in the worst-case scenario lose far more than what they gained through trading.

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