Forex vs Crypto – Which Is More Profitable
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The main difference between Forex and Crypto is that Crypto market assets are electronic currencies that are digitally issued in blockchains while forex market assets are fiat currencies owned and issued by governments of different countries. Forex is a bigger market, very liquid and it is traded 24/5 while crypto is smaller, more volatile, and traded on a 24/7 basis.
Both forex trading and crypto trading are related in several ways; in each case, currency pairs are traded in order to take advantage of the exchange rate fluctuations. Similar principles of demand and supply govern both markets and even comparable software platforms are used in trading both financial world assets.
This article will focus on crypto vs forex; we will begin by explaining the meaning of forex and crypto. Then, we will explore the differences and similarities between the two markets, assets traded and benefits derived from each of them. We will conclude with the best forex trading course.
Table of Contents
Forex vs Crypto: What is Forex
Forex is the shortened form of ‘foreign exchange’ which means the trading of one currency while receiving another. It is very important in tourism, international trade, e-commerce, etc. Forex trading is the process of buying and selling currencies from the forex market with the aim of making profits from fluctuating exchange rates.
The forex market is the online marketplace where forex traders from all over the world meet to buy and sell currencies. The markets determine the exchange rates; decide trading modalities and release market data. It is open on a 24/5 basis. Currencies are paired so that they can trade against each other and the exchange rates can be written as a single quote.
The ‘interbank market’ is the highest tier of the forex market where the big international banks trade large volumes. Forex trading brokers, hedge funds, institutional investors, smaller banks, and financial investment firms trade at the next lower level of the market while retail clients trade at the lowest tier. These retail traders can only trade via online forex and CFD brokers.
Forex traders speculate on the price directions of currency pairs and stand a chance of making profits if they are right. All trades or orders are placed via software trading platforms provided by brokers. The speculation is done as follows:
- If you forecast a price increase; go long or open a buy position.
- If you predict a decline in exchange rates, sell the currency pair or open a short position.
What is Crypto
Cryptocurrency or crypto is a digital currency that is created and spent electronically. It is basically a digital file created in a blockchain network and secured by cryptography. Blockchain is a record of transactions that is encrypted and distributed between authorized nodes or computers in the network. The blockchain records are transparent among nodes; they cannot be modified as transactions are irreversible.
Cryptos are stored in wallets which may be digital, paper, or hardware wallets. The wallets store the private keys that can be used in sending and receiving cryptos. These keys prove ownership and allow you to make transactions on the blockchain.
The first cryptocurrency is Bitcoin; it was founded in 2009. Today, there are more than 12,000 cryptos but a few of the most popular ones are; Bitcoin, Ethereum, Ripple, Ether, Litecoin, Bitcoin cash, etc. You can buy and sell cryptocurrencies from crypto exchanges such as Binance, Coinbase, KuCoin, etc.
Crypto trading is the buying and selling of digital assets like cryptos and non-fungible tokens (NFTs) in order to make profits. Two popular ways of trading cryptos are:
- Speculating on crypto prices via cryptocurrency exchanges
- Trading crypto CFDs via online brokers
Similarities Between Forex and Crypto
The forex market is decentralized; there is no central authority controlling the markets. It is an over-the-counter market (OTC) where forex traders directly interface with each other and trade. Crypto markets are also decentralized and unregulated.
Crypto and forex trading has similar requirements. Basically, to start trading any of them, you need an internet-enabled device, a brokerage account, trading capital, and trading knowledge. If you already have experience in forex trading, then crypto trading will be easier to learn and vice versa. The currency charts, timeframes, indicators, and trading tools are all the same for the two markets.
Both forex and cryptos can be traded as CFDs. Contract for Differences (CFDs) are financial contracts that allow traders to speculate on the price movements of the underlying assets without owning them. So, crypto trading via CFDs will only enable the prediction of the price movements of crypto without any need for wallets. Just like forex trading, all trades are cash-settled.
Crypto and forex hold values that are relative and quoted against each other. For example, the value of 1 Bitcoin is mainly expressed in United States Dollar (USD) or other currencies. On various exchanges and broker platforms BTCUSD, ETHUSD, XRPUSD are traded assets. Investment in cryptos and forex are similar. You can trade Bitcoin futures at the moment and in the near future, other coins are likely to follow.
Differences Between Forex and Crypto
The forex market is much bigger and older when compared to the cryptocurrency market. It is reported that the forex trading volume is about $6.6 trillion every day. It has more participants especially institutional traders, unlike the crypto market which is primarily made up of individual crypto traders.
Although in the past few years, the crypto markets gained more recognition and the market caps of many cryptocurrencies soared; still, the market size is far below that of the forex market.
Forex is much more recognized and accepted than cryptos. Most governments allow their citizens to trade and own forex; even central banks maintain reserves in foreign currencies sourced from the forex markets.
Unlike traditional currencies, cryptos are not as widely recognized or trusted. No country officially maintains its reserves in cryptocurrencies. Some countries like China, Egypt, Algeria, Nepal, etc have outrightly banned their citizens from cryptocurrency trading.
The forex market has much more liquidity than the cryptocurrency markets. This is why its small price movements are measured in pips; usually defined as (1/10,000) of a unit of most currencies. But, the crypto market is less liquid and highly volatile. So, crypto traders are exposed to higher risks but have higher chances of making huge profits.
There is a measure of regulation in the forex market when compared to crypto trading. Though there are unregulated brokers, the biggest brokers are regulated. So, before opening a trading account, they demand verification documents from potential forex traders. Even though some dedicated cryptocurrency exchanges require some identification, direct crypto transactions are anonymous. Even centralized exchanges have been hacked and cryptos were stolen without a trace.
Pros and Cons of Forex
- Very large market size
- Small capital requirement because of high leverage
- Multiple trading resources are available; e.g. trading robots, trading tools, market analysis, trading academies, trading signals, etc
- Supports trading on multiple devices
- High liquidity may mean that if your trading volume is low, you have little chance of turning out huge profits from the forex market
- Depending on your strategy, forex trading can be time-consuming
Pros and Cons of Crypto
- High volatility can be translated to high-profit potential if you are on a winning trade
- Anonymous transactions
- Trading can be done anytime any day 24/7
- An infinite number of tradable assets; there are thousands of cryptocurrency pairs
- Huge losses might result from high volatility
- Traded on lower leverage
Best Forex Brokers
|Broker||Best For||More Details|
Advanced Non US Traders
securely through Avatrade website
Intermediate Non-US Traders
securely through FXCC website
securely through Forex.com website
Professional Forex TradersRead Review
securely through Interactive Brokers website
Best Crypto Brokers
|Broker||Best For||More Details|
securely through Coinbase website
securely through Binance website
Sign Up Bonuses
securely through Crypto.com website
New InvestorsRead Review
securely through Gemini website
Best Forex Trading Course
The internet is bursting with forex trading articles, videos, and training academies. Beginner traders are often confused in making the choice of which training package to choose. As of today, the best forex trading course is the ‘One Core Program’ provided by the ‘Asia Forex Mentor’ (AFM) website. It is created and facilitated by ‘Ezekiel Chew’ who has been trading the financial markets and training traders for several years.
The ‘one core program’ is a proprietary high return on investment (ROI) strategy that has been largely successful. It is the same tested and proven secret that Ezekiel Chew has been using to train bankers and clients from all over the world. Many institutional and individual traders who passed through the course have used the strategy to generate millions of dollars from the forex markets as well as other markets.
The course is designed for anyone who is willing to learn, no prerequisite knowledge is required. The trading course has more than 50 video lessons including ’Road to million formula’ and ‘Asia Forex Mentor proprietary point calculation system’.