Forex is an international financial market for currency exchange. The number of individual traders around the world today is huge, and the forex turnover is more than 5 trillion dollars a day.
Recently, cryptocurrency has been added to the list of trading instruments on the exchange. High cost and great volatility have turned it into a new trend. Today, many forex brokers offer cryptocurrency trading intermediary services. Let's try to find out if cryptocurrency trading is really as profitable as they say, what risks an unprepared trader may face, and what are the key differences between cryptocurrency trading and trading on the classic forex market.
Where to buy cryptocurrency?
According to the rating of forex brokers, cryptocurrency trading services are offered by many brokers. Some of the most common include Forex.com, XTB, CMC markets, eToro, and others.
Is cryptocurrency trading a risk?
The high price of bitcoin, altcoins, ethereum, and other digital currencies inspires traders. Many simply invest in currency and expect unprecedented growth. Traders, on the other hand, understand that you can earn both on the growth of the crypto and its fall. However, cryptocurrency trading carries risks. Let's figure out which ones.
- The cryptocurrency market is extremely volatile. Take, for example, the most popular cryptocurrency - Bitcoin. As of December 2017, Bitcoin was worth $ 19,253 per unit, but by April 2018, its price had almost halved and amounted to $ 8566. Daily fluctuations in the course sometimes reach 30%. Due to the unpredictability of crypto behavior, an inexperienced trader can lose everything in one transaction.
- The price trend in the forex market depends on economic and non-market factors. It is influenced by politics, the absence or increase in demand for foreign currency. Forex trading strategies have long been familiar to traders. The situation on the cryptocurrency exchange is strongly influenced by IT trends. If the trader does not understand them, the risk of making a wrong bet increases. Thus, cryptocurrency trading, in contrast to forex trading, requires additional knowledge.
- Cryptocurrency does not yet have legal status in many countries. This means that a country's decision to legitimize or ban it can cause both collapse and a sharp rise in the rate. Confirmation of this is the situation in China. The ban on cryptocurrency and ICO trading was followed by a sharp decline in bitcoin. The Chinese authorities did not stop the fact that the country is mined? of the total share of bitcoins in the world.
- The currency quote of any currency depends on macroeconomic indicators: inflation, unemployment, the productivity of the economy and the number of financial reserves of the country. In other words, it has a real foundation. Cryptocurrency is not attached to anything.
- The inapplicability of technical and fundamental analysis for building a trading strategy. That is cryptocurrency trading is roulette. No one knows what will happen to her tomorrow.
- It is problematic to raise funds on the exchange - large losses on the conversion of funds into cryptocurrency.
However, cryptocurrency trading has several undeniable advantages:
- It is modern and interesting to sort out a new market.
- Big profits. Cryptocurrency earning potential is not limited.
- Thanks to broker leverage, the minimal investment allows you to get good earnings.
- Cryptocurrency is a limited resource; only a small percentage of people own it. The more limited the resource, the higher its price.
- If cryptocurrency is legalized, the price will go up sharply
- Very high level of protection. Digital money cannot be faked or stolen.
Forex trading - less profit, but less risk?
- A significant trump card in the forex market is high liquidity. You can make a large number of transactions on one currency quote in a short period.
- 24-hour availability. The forex market is open around the clock. You can trade at a convenient time from anywhere in the world.
- A wide range of tools for trading: proven trading strategies, a large number of robots and advisers that help to earn and control risks.
- Using technical and fundamental analysis to build a long-term trading strategy.
- Lots of training courses and materials
- Professional Trading Platforms
- High payback. Thanks to the leverage (sometimes it reaches 1: 3000), a small starting capital allows you to open deals that exceed it many times.
- A huge number of bonus programs that allow you to start trading and make a profit even without money.
However, Forex is also not without flaws
- Unfair brokers spoil market’s reputation.
- If you choose a little-known company, then it can cost you all your money. Since the company may be one-day.
- High shoulders = high risks. And with low leverage, earnings are no longer so high.
- Forex trading also carries risks. One wrong transaction may cost a deposit.
While it can be hard not to be tempted to trade with one of the hundreds of new cryptocurrency exchanges popping up across the internet, these exchanges can often be hacked and sometimes fined for not full filling KYC/AML regulations. Even with the expanding number of currencies adopting cryptocurrency trading, many regulatory questions and challenges are still to be answered.