A lot of people seem to confuse forex and crypto trading with each other. While both are very popular and people manage to earn a decent amount of money from trading, in essence, they differ. This article will revolve around crypto and FX and answer the question – what can crypto traders learn from FX.
The Emergence of the Forex Market
The Forex market emerged in the mid-70s after the economic model laid down in the Bretton Woods Agreements of 1944 ceased to cope with modern challenges. Some challenges evolved, the system became obsolete, and changes were recorded in January 1976, and are called the Jamaican Accords. So there was a Forex market.
Many people mistakenly believe that the primary function of forex is speculative operations with currencies, well, and currency conversion during export-import operations. But this is just a clear, open part of this world. If you are determined to learn about forex and start trading, then you should learn the basics in order not to mistake concepts. The Internet has a number of video tutorials, books that are available completely free of charge. A website like Axiory is a clear representation of that. The site provides information about basics, trading platforms, etc. Forex is a very vast field, so obtaining knowledge is never enough.
The floating exchange rate system is a mechanism for redistributing part of the profits from the industrial and trade sectors of the economy in favor of financial ones. This is where the main money is made, and therefore the forex market will work as effectively as long as fiat currencies will remain the main means of payment.
What is called forex trading in the trading environment, has nothing to do with the mechanism described above. Forex for a regular trader trading on the MetaTrader platform in one of the many brokerage (actually dealership) centers is a game mechanism.
Forex traders, in fact, do not trade currency. They bet all the time among themselves – who better predicts the future exchange rate. Forex is a kind of gaming club. A trader opens a deposit denominated in some currency, usually in US dollars.
While talking about currency pairs, trading platforms, exchange rates and all that staffs we could also say from the abovementioned Axiory, that the latter has a unique Axiory Academy which is for the most part suited for the experienced and ‘veteran’ traders, those who have already managed to achieve successes in the industry, but as learning is never enough and especially in the field of forex, one should always strive for gaining as much information about Forex as possible.
The World of Cryptocurrencies
The world of cryptocurrencies is completely different. When the Bitcoin was created in 2009 it was an amazing innovation. Trading cryptocurrencies on exchanges is, unlike forex precisely in the coins that are used. Each trader possesses the coins that are in his/her portfolio, and not their equivalent, expressed in the deposit currency. Trading is not through imitation but through real exchange transactions. This is the most important difference between the world of forex and the world of cryptocurrencies.
There are other differences, no less important. Exchange rates are a reflection of the real state of the economies of countries issuing these currencies. Exchange rates are in a balanced state; changes are recorded at the levels of the fourth to fifth decimal places. With cryptocurrencies, the trading amplitude is hundreds and thousands of times higher.
The strong amplitude of cryptocurrency exchange rate fluctuations makes it possible to profit from exchange operations without using margin leverage, which eliminates the possibility of losing a deposit due to a margin call. In fact, this means significantly higher security of the trader in the cryptocurrency market relative to the forex trader.
What Can Crypto Take From FX?
Of course, forex still has quite a few advantages. This is margin trading, and detailed trading platforms such as MT4 or MT5, which make it possible to create and use hundreds and thousands of indicators and trading robots. Technical analysis works well at forex which, as you know, is adequate just in balanced markets. Crypto can learn it from its counterparts.
Forex traders are accustomed to these small conveniences. Another difference we can mention here is the regulation and safety, which is one of the essential parts of any trading. Crypto trading is a less regulated and relatively new field, while forex has all the regulations. Crypto traders are frequently subjects of fraud schemes, so they should pay attention to this from forex counterparts.
Thus, a comparison of forex and cryptocurrency markets shows that with external similarity, these are completely different markets, and crypto trading has more to learn from forex than vice versa.
Featured image: bitcoinist.com