Forex Vs Cryptocurrencies Vs Stock trading: Which Market to select for investing in?
Forex trading is the buying and selling of different currencies on the foreign exchange market. On the other hand, cryptocurrency trading involves buying and selling digital currencies (e.g. Bitcoin, Ethereum, etc) on a decentralized digital exchange.
Buying and selling stocks can also be done either by obtaining the stocks or via different trading platforms where no physical stock exchange is taking place.
It is important to understand the major differences between the markets and the risks involved in selecting the most appropriate Market. All three of them have varying amounts of volatility and diversification. At the end of the day, the question remains: Is there any of them better than the others in terms of investment, goals, risk tolerance and profits?
At this article, we will analyze these three Markets and their characteristics, while mentioning advantages and disadvantages and spotting all the major differences between them.
Market trading hours: One of the main factors to consider for trading and market selection is the available Market hours. The operating hours for forex trading are 24 hours per day, 5 days a week, Monday to Friday. The forex market starts from Asia session (where Japan and Australia markets open), then moving to the European session (with London and UK hours prevailing France and Germany stock exchanges) and finishing with the US session (with New York stock exchange trading hours). Similarly, during these sessions we can spot the most active stocks, where during European trading hours, most of the stocks’ volatility comprises from EU companies and EU stocks. Cryptocurrencies on the other hand, have a 24/7 market availability. Cryptos never sleep and traders can trade 24 hours per day, 7 days a week. Of course, there are times during a day where the crypto market is not so volatile, but the Market and the opportunity to open a trade is there.
Regulation: Stock and foreign exchange markets have existed for a long time. In fact, there are several central authorities which are responsible for regulating these markets in different countries. In most cases, these regulatory organizations are either central banks or financial and governmental institutions. Due to this regulatory environment in some countries and regions the operation oversight might be lenient and at some areas stricter. Therefore, in regions where the regulator is strict and applies frequent monitoring and checks, there will be fewer incidents of fraudulent activities. Cryptocurrency activities are largely not controlled by any central authorization organization. The safety of crypto activities relies mainly on the security of the crypto network which is used for a transaction or a cryptocurrency exchange reputation. Cryptocurrencies and blockchains are difficult to tamper with, but crypto exchanges and crypto wallets are susceptible and vulnerable.
Volatility: All three markets have numerous choices in terms of trading symbols, stocks or pairs. However, the cryptocurrency market is by far more volatile than the others. This factor is that it makes this market so attractive to traders, and especially new and non-experienced ones. Many traders are looking for an opportunity to make huge profits within a small period. Fluctuation at the forex and stock market is relatively low, while we can spot some movement especially during the announcement of important economic news or any other relative financial news in regard to stock market (e.g. dividends, acquisitions, buy-outs, etc). The lower volatility drives and controls the risks associated with the investments which can be considered a long-term investment.
Trading Skills: Before a trader decides to invest in a specific market and start trading, several trading factors need to be considered in advance. Forex trading is well known for offering high leverage at many forex brokers, while stock trading leverage is relatively low. Due to the nature of the financial market and its regulatory restrictions there are several monitoring procedures like KYC standards which protect the investors’ interests. On the other hand, crypto market offers anonymity and low initial investment amounts to open an account and start trading. During the last years, cryptocurrencies are trending, and they are considered the new financial hype especially considering the low transaction fees and the potential of high returns. The options and pairs for trading are thousands. The anonymity offered by cryptos can also lead to low security measures and often we witness accounts hacked without the possibility of reimbursement.
It’s not a matter of profitability but rather liquidity and volatility when it comes to distinguishing the dynamics of the markets. Forex can offer more liquidity while cryptocurrency market is usually known for being more volatile. At all types of trading a certain degree of speculation is involved which, at least for a short period of time, drives the buyers and the sellers. Therefore, it is easy to understand that there is no risk-free trade and market involved. The best way is always to consult with a financial expert, test any trading strategy before trying it to a real trading account and always invest an amount you are comfortable losing.
