Do the Forex and cryptocurrency markets have anything in common? While both terms may sound different and the markets are separate, they still have many overlapping characteristics. In this article, we will cover how cryptocurrency and Forex work similarly. In particular, we will start with a brief over view of what Forex actually is, what is traded and how it operates. Afterward, we will get into the similarities and strategies associated with both markets. With that being said, let’s get right to it.
What Is Forex?
The FM market or Forex is the largest platform for trading in the globe with 5.1 trillion dollars being exchanged everyday. This is a large amount of wealth being shifted daily. For instance, the USA stock market trades approximately $257 billion every day. This is a fraction of the amount of what Forex produces on a day-to-day trade volume.
Additionally, foreign exchanges operate for five days out of the week and for twenty-four hours a day on those days. For instance, Forex trades are always in operation with the help of individuals and banks across the globe. For Forex, you will not find any central market as it is not directly associated with any other financial platforms. There are currency trades taking place on any market opening which might sound familiar to some crypto traders.
How Does Foreign Exchange Trade Operate?
With foreign exchange trade, you will have to buy a currency and later sell for another. Marketing and buying currencies will help you see more profits in Forex. Specifically, It has to do with speculating over how currencies will behave in the market. The speculation you set on in Forex can either be for futures or current value. Here is a list of some of the major currencies offered on the Forex Market.
The Major Currencies Of The Forex Market
Trading Currency Pairs
The real Forex market is a product of the major currency pairs. Although, the minor currency pairs can also help traders make a profit. The combination of other larger currency trades can also be the product of the minors. It can be in JPY/GBP, CHF/EUR, and GBP/EUR. The one big question that comes to mind is selecting the best currencies to trade.
The best way to go is by concentrating your trade on two or one currency pairs. It is perfect for anyone new to the Forex market. In most cases, the JPY/USD or USD/EUR happens to be the choice of traders. It is because these economies have enough resources and information available to traders. The truth is that these pairs happened to be the main volume of global trade on Forex due to trader preferences. Besides preferences, the hours of operation are very important to consider before trading.
International Market Hours For Forex Trading
Forex trading will always open around 9 pm on Sunday and close 20 GMT by Friday. During Forex hours, traders have the opportunity to trade, sell, and buy currencies. Asia, America and the Pacific will open markets at GMT to promote a fair and standardized market timing. Frankfurt opens the Forex market at 7 am from Monday through Friday. In London, the Forex market opens at 8 am. Access to the Forex platform is possible once the markets are open from multiple sources online or through brokers and exchanges. In similar fashion, the cryptocurrency market is up 24/7, but open for all 7 days of the week instead of the limited 5 days for Forex.
The Comprehensive Details Of Cryptocurrency
Besides the up time, cryptocurrency similarly remains a digital currency without any central point of operation. For instance, It means that the system behind cryptocurrency obeys a complex decentralization policy derived from its coding architecture. In addition, cryptocurrency doesn’t work with central bank’s regulations like fiat currencies do on Forex. Instead, this digital currency can operate freely on simple speculations, investing and trading.
Cryptocurrencies That Are Popular To Traditional Investors
Bitcoin – Bitcoin is the number one cryptocurrency which was created in 2008 by Satoshi Nakamoto. Bitcoin is the main currency for exchange across the entire market.
Ethereum – Among many cryptocurrencies contesting with Bitcoin, Ethereum remains the runner up. After launching in 2015, this digital currency changed crypto investing forever.
Dash – Dash came to the scene in 2014 as a secretive and anonymous digital currency. One thing outstanding about Dash is that it performs untraceable payments.
Litecoin – This payment transaction digital currency was formed in 2011 and is one of the oldest. Therefore, It is considered to be the silver digital currency to Bitcoin’s gold.
Ripple – It is one of the top three digital currencies that has a different perspective then Bitcoin. Since inception in 2012, It has begun to disrupt international transfers like SWIFT.
Cryptocurrency and Forex
Let’s take a minute to review some of the similarities between the two markets. The table below outlines interactions between cryptocurrency and Forex.
|Cryptocurrency Trading||Forex Trading|
Cryptocurrency exhibit permanent and quick transactions. Although, there is a small transaction fee for every crypto transaction. Brokers and Exchanges can offer anywhere from 10x to 100x leverage on some
|With Forex trading, there is a space for leverage of 10x and much higher as well. This implies that a trader can perform a trade of $1000 using only $100|
|2. Impact From Announcements, Global News, And Earnings Reports:|
Announcements in the crypto market to no typically correlate with the market swings. Occasionally, reports on SEC regulation, global partnerships, and listings can still sway certain assets.
Influencing factors in Forex can let traders find better opportunities. Using analytics and event procrastination, traders can also help predict the market.
The availability of cryptocurrency is in limitation. Demand will increase due to lessening in supply over time.
The supply-demand for Forex is relatively simple and dictated by the buyers and sellers. There is more or less a finite amount of each asset class.
|4. Liquidity |
Traders can get large profits on the levels of liquidity across exchanges, brokers, and dealers. Additionally, crypto is slowly gaining more use-cases and reaching higher levels of adoption
Liquidity is high for Forex trading with the same market advantages but institutional focus if higher in Forex.
Beside the similar interactions, there are also similar strategies to implement on both markets.
Top 8 Strategies When Trading Cryptocurrency and Forex
1. Get rid of volatility with pound/dollar price or with a stable coin
2. Use investment theme techniques like dollar cost averaging or spreads
3. Diversification of portfolio by hedging, options and uncorrelated assets
4. Engage in smart holding like cold storage and verifiable dealers or brokers
5. Try to invest by using a stable and secure crypto asset
6. Pool Investments if able to form stronger portfolios with other traders
7. Engage in passive income while investing with cryptocurrency
8. Never trust the market sentiment or majority. If everyone expects it, it will probably be wrong
Cryptocurrency And Forex Markets
Mainly, one con and pro that exist in both platforms is the high volatility factor. The truth is that the reward will be high when the risk escalates. The market of cryptocurrency can see larger fluctuations and even larger return per risk. Although, both markets will feel the touch of price variation over time.
Forex and Crypto Similarities
In conclusion, there is a high level of involvement for people trading Forex and cryptocurrency. To trade on either market, you need perseverance, efficient equity scheduling, continuity, and effective risk management. Therefore, being open to learning from other experts will help you thrive in both markets. There is every possibility to enjoy great benefits when trading on these platforms. Dig deep into these markets today and enjoy the dividend now or later in the future.