Risk Warning: Your capital is at risk. Statistically, only 11-25% of traders gain profit when trading Forex and CFDs. The remaining 74-89% of customers lose their investment. Invest in capital that is willing to expose such risks.

Forex vs. Crypto Trading: Understanding the Similarities and Differences

Author: Christophe Williams
Christophe Williams
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Forex vs. Crypto Trading: Understanding the Similarities and Differences


Forex and cryptocurrency are two of the most popular and widely traded markets. While forex (foreign exchange) has been around for some time, cryptocurrency’s recent boom has rattled the market scales. Many traders and brokerage companies have taken keen interest in the crypto markets and considerable advancements have been made. You can attest to rise of popular cryptocurrencies such as Bitcoin, Ethereum and Elon Musk’s favorite –dodge coin. 

Now, most often these two terms –forex and crypto –have been mistaken with each other. Traders, especially newbies, cannot tell one from the other. So, what exactly is crypto trading and how does it differ from forex trading. Let’s take a deep dive:





The foreign exchange or forex market, as it is popularly referred to, is a global market where traders get to exchange government backed currencies with an end goal of profiting from the differences of the ever-changing market prices. Say you assume a $10 position on a currency pair and your chosen currency value increases to $15 for when you close out your position, the difference in price is your profit. Choosing the best exit point is also key when trading forex.

Forex is a highly traded market and has a daily turnover of close to $7 trillion. Staggering numbers right? Now let’s weigh the pros and cons.


Pros of Forex Trading

Forex trading has its perks. For starters, the cost of trading forex is very low. With some brokerage companies offering deposit options of as low as $10. Anyone can create an account with their preferred brokers and start trading forex with little capital as compared to crypto.

Another advantage of forex trading is increased leverage. Price movements in forex markets are relatively subtle and can easy be predicted. This provision has made it easy for brokerage companies to offer more leverage to their traders –you might find a forex broker offering up to 50:1 leverage to their traders. There are various advantages of leverage trading and more profits top the list.


Cons of Forex Trading

Forex markets are highly volatile. This is so because several factors can contribute to the behavior patterns of the market. Global events such as the war in Ukraine, or Brexit can have a direct impact on forex markets. To expand on this; since forex markets are dependent on international currencies, which are also government backed, factors such as political events or central bank policy updates can greatly influence market patterns.  Remember central banks regulate their respective currencies and in the event their decisions go contrary to your strategy, you are bound to register losses.




Crypto trading is the buying and selling of assets such as cryptocurrencies and Non-Fungible Tokens (NFTs) on exchanges. It's done through an online platform, similar to forex, which allows you to trade one cryptocurrency for another. Crypto traders use these platforms because they're centralized and easy to use. This means that there's only one way that your funds can be transferred from one account to another. 

Exchanges tend to be more expensive than forex brokers because they have high transaction fees associated with them. It is also important not to forget about hidden costs such as margin trading fees or spread requirements on certain pairs due to volatile market conditions during times when price action moves quickly between different levels within a day’s time span – all these factors need consideration before entering into any type of deal with regards towards making profits off doing so.

Although the cryptocurrency market has cemented its position as a game player in the financial markets, it is yet to be fully accepted by majority of traders. In fact, there are many investors who believe that trading on cryptocurrency exchanges is not suitable for serious traders. This however does not dispute the fact that cryptocurrency has been around for quite some time now and is one of the most popular asset classes in the world.


Pros of Crypto Trading

Crypto trading, I would say, has more pros than cons. Crypto is decentralized in that there is no oversight organization/company that determines its market prices. The prices rely purely on market factors; which means that traders themselves control the behavior of crypto prices.

Additionally, you can trade crypto even during weekends which means more profit. We can’t say the same for forex trading.

Cons of Crypto Trading

As mentioned, cryptocurrencies are often preferred as a means of storing wealth rather than a tool for making profits. With this said, when you acquire a cryptocurrency you will be tasked with not only storing it, but storing it safely: And this will often result into additional costs that you may or may have not planned for. 

You cannot benefit of short-term trading with cryptocurrencies. Crypto will rarely increase in value over a very short period of time, and traders relying on this trading strategy may end up failing. Coupled with being less liquid, crypto is not ideal for short term trading. 




Understanding the Forex and Crypto Markets

Before you jump into the forex market, it's important to understand some of its key similarities and differences from other financial markets. The most basic explanation of forex is one: forex is simply putting one currency against another hoping your preferred currency increases in value. There are various ways, such as technical analysis or copy trading, through which this can be achieved.

Arguably, forex is the largest financial market in the world, with a daily turnover of over $6 trillion. It's also decentralized, meaning there isn't an individual exchange operator or clearing house that regulates trades between buyers and sellers—rather, this occurs through trading platforms. This means that whenever you want to make an order for something like foreign currency or gold futures contracts (which are part of commodities), you go online and find a broker who can facilitate your transaction for you.

Forex trading is available 24/5 (on weekends forex markets are closed) and trades can be carried out at any given time. Currency prices fluctuate constantly each day; therefore, there's no need for strict hours when it comes time for closing positions on open trades! And since this market has been around since 1967—and even before then if one were willing or able to consider how long some African empires lasted before collapsing under their own weight—it's safe to say its history stretches back thousands upon thousands years into antiquity itself!



Forex Vs Crypto: The Differences and Similarities

The first thing you need to know is that there are many similarities between crypto and forex. When trading one market, your risk can be high or low depending on the market prices. If an asset’s price drops significantly, then it will be difficult for you to make any money on it because the demand has gone down. On the other hand, if the asset rises dramatically in value then it could become profitable for investors such as yourself who have purchased at very low prices.

With the similarities, also comes the differences. As both forex and crypto markets offer potential returns, the biggest difference between the two comes down to risk management. This and a whole lot of other factors, that we’ll look into at length, define forex and crypto markets in their entirety.


Trading Pairs

Forex and crypto are two different types of trading options. They both have their own unique features, but they do share this similarity: Having trading pairs.

The basic mechanism of forex is to swap one asset with another. Say you are buying Twitter stock, you’re more likely to purchase it using your own USD. Swapping the USD for the Twitter stocks. This explains why currencies are always quoted in pairs. 

Crypto trading pairs, on the other hand, are more complicated than forex trading pairs because they need to be paired with other cryptocurrencies or fiat currencies (e.g., USD). For example, if you want to buy Ether, found on the ethereum blockchain, then you’ll need to buy USD first before depositing funds into your account. This can be time-consuming and confusing for new traders who don't know how it works yet!



Market Capitalization

Crypto markets remain much smaller than forex markets. The crypto market cap is around $200 billion and it's still growing every day. Bitcoin alone has a market cap of around $180 billion while Ethereum is at $74 billion (as of January 2019). In comparison with this numbers, forex pairs have a total value of around $5 trillion! This means that there are more people interested in trading currencies and bonds than in trading cryptocurrencies. 

This concept makes sense since currencies are seen as potential assets while cryptocurrencies are mainly used to store wealth rather than make profits on them. However, this doesn't mean that you should ignore cryptocurrencies completely if you want to make money from them: There are plenty of opportunities waiting for anyone willing to take advantage!



Volatility of Forex and Crypto Markets

The volatility of a financial instrument or asset is the measure of its price change over time. Volatility is typically measured by standard deviation, which can be defined as "the square root of the variance" (this means that if you have an average of 100 points and the average moves up 1 point, your standard deviation will be 2).

Forex has lower volatility because it has longer periods for prices to move up or down compared to cryptocurrencies where there are only two days (or less) for price changes to come in to effect. This makes it harder for investors to predict when they should sell their coins in exchange for fiat currency since they don’t know what will happen next week or even next month!




One of the most important factors to consider when choosing between forex and crypto is liquidity. Liquidity refers to how easily you can get out of a position, which determines how much money you will lose if your trade goes wrong. For example, if you are in a trade with a large amount of leverage (the amount by which your balance grows), then it is possible for an unexpected event like Brexit or an economic crisis could affect your account negatively. 

However, if there is sufficient liquidity in the market at any given time then this volatility will be mitigated by other traders who see potential profits from buying/selling assets at similar prices as yours. Therefore, having access to high levels of liquidity allows investors greater control over their investments while also making trading less risky. 



Trading Hours

Forex and crypto both have their own trading times. Globally, there are three main forex trading sessions: European (London), Asian (Tokyo), and American (New York). Let's take a look at the differences between the trading hours of these two market options. 

Forex trading is available 24/5, which means that it's open to everyone around the world 24 hours a day for 5 days: Weekends are only the exception. In contrast, crypto trading is not regulated by any timelines, so it can be done from anywhere in the world at any time of day or night (although there are some restrictions on how much you can trade). Cryptocurrency exchanges are often open 24 hours a day, but some only have night hours during weekends and holidays.



Fees and Costs involved in Forex and Crypto Trading

Forex and crypto are two of the most popular investment options. As an aspiring trader, choosing which market to venture into can be problematic. There are various reasons that can factor in when making this decision and costs of trading is among them. 

Forex is more expensive than crypto when you trade large amounts of money. When you’re trading only a few thousand dollars at a time, crypto can be cheaper option. However, when you start trading larger amounts of money on forex or crypto exchanges (or both), the cost difference becomes much greater—and it gets even worse if those transactions involve multiple parties who need to pay fees across multiple time periods over the course of their trades.

Crypto is generally cheaper when investing small amounts into an altcoin like Ethereum or Bitcoin Cash because there are no transaction fees associated with buying and selling coins through an exchange like Coinbase Pro or Gemini. However, this doesn't mean that all cryptocurrencies will give investors lower rates; some offer better returns than others depending on how they're priced relative to other cryptocurrencies like Litecoin and Ripple XRP which charge higher prices per token traded during each transaction period."



Taxation of Forex and Crypto Assets

Crypto is taxed differently from Forex. Why? Because it is considered more a property than it is a currency. This means it’s taxed as a capital gain or loss. So if you buy bitcoin worth $10 and sell it for $20 in four months, your profits would be taxable as long as they exceed the cost of buying them (in this case, $10).

On the other hand, forex trades are treated differently by the IRS because they fall under “real estate transactions” rather than “capital gains and losses." That means there's no capital gain or loss when you sell forex contracts—it's just ordinary income instead! If this sounds confusing to you (or if we've missed anything), don't worry—it can be tough to wrap your head around everything at first glance! There are plenty of resources online dedicated specifically toward helping people understand how taxes work with cryptocurrency and vice versa.




Takeaway Points

The similarities and differences between the forex and crypto may seem obvious, but they aren't always easy to understand. In this article we have already discussed a lot concerning forex and crypto. We have mentioned why crypto is more volatile than forex, or why you should expect lower liquidity in crypto markets compared with forex markets etc… 

Here are some important take away pointers that can help steer you in the right direction for when you have to choose between the two:

  • Cryptocurrency is a relatively new market. Crypto has been around for less time than forex and as such hasn't had time to mature into an established financial application like fiat currencies have. 
  • Forex handles large volumes of money globally compared to crypto markets. The forex markets it easier for investors who want peace-of-mind knowing that their hard earned dollars won't disappear overnight into thin air.




As you venture into trading, it’s important to know the difference between forex and cryptocurrency. Understanding what sets the two renowned markets afar, yet close still, will help you make an informed decision as to which one is best for you. 


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Risk Warning: Your capital is at risk. Statistically, only 11-25% of traders gain profit when trading Forex and CFDs. The remaining 74-89% of customers lose their investment. Invest in capital that is willing to expose such risks.