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Cryptocurrency and forex are both financial markets that allow investors to buy and sell different types of assets. Both markets can offer high levels of liquidity, while also providing opportunities for traders to make significant profits.
In this article, let's take a deeper look at these (and other) similarities between Forex and Crypto!
High Liquidity
One of the most important similarities between cryptocurrency and forex is that both markets are highly liquid. This means that investors can buy and sell assets at any time, with very little delay or hassle.
So, if you feel like selling your Bitcoin in Australia right now, you can do so easily and quickly by using an online trading platform. And if you want to buy more Ethereum, you can simply place another trade in a matter of seconds.
Similarly, forex traders can also access high levels of liquidity, thanks to the many different trading platforms available. Whether you're buying or selling currencies like EUR/USD, there is always (24/7 and 5 days a week) an active market that provides constant price updates and fast execution times.
Trading Opportunities
Another similarity between Forex and crypto is that both markets offer ample opportunities for traders to earn significant profits.
In the forex market, this often comes in the form of trading currency pairs or using leverage to take advantage of short-term price movements.
For cryptocurrency, it can mean buying low and selling high, or taking advantage of price fluctuations using smart trading strategies like technical analysis.
Moreover, both markets support other interesting financial instruments, such as options, futures, and CFDs.
Similar Technical Indicators
Both markets use similar technical indicators to help traders make informed decisions.
In the Forex market, this can include things like trading volume, price charts, and economic indicators.
In the cryptocurrency market, these indicators can include things like trading volume, price charts, and market sentiment indicators like the Bitcoin fear-and-greed index.
Consequently, doing a technical analysis in either market is a very similar process. For example, in both markets, investors can use price and volume charts to identify key support and resistance levels.
Both Involves Currencies
In the Forex market, investors can buy and sell major currencies such as the US Dollar, the Euro, and the Japanese Yen.
In cryptocurrency, investors can buy and sell digital currencies such as Bitcoin, Ethereum, Litecoin, and many others.
The difference between these currencies is that crypto is a digital and an unregulated currency, while forex is an established currency used by governments and financial institutions around the world.
Trading Pairs
When you trade in a currency market like Forex, you will typically be working with two different currencies (a currency pair) at the same time.
For example, if you buy EUR/USD, this means that you are buying Euros with US Dollars. If you sell EUR/USD, it means that you are selling Euros for US dollars.
In cryptocurrency trading, you would also use currency pairs to buy and sell your digital currencies. For example, if you want to buy Bitcoin with US Dollars, you would look for the BTC/USD pair on your trading platform.
However, because there are now thousands of crypto currencies available, it's very difficult to create a swap between all cryptocurrencies.
For this reason, an intermediary currency such as Tether is often used to trade between different coins. So, if you want to trade between XRP and Ethereum, for example, you would first exchange XRP for Tether (USDT) and then exchange those USDTs for Ethereum.
Trading Platforms
Both crypto and Forex have their own trading platforms, with Forex traders typically using platforms from providers like MetaTrader and eToro.
On the other hand, cryptocurrency traders usually use exchanges like Binance, Coinbase, Kraken, and Bitstamp to buy and sell their digital currencies.
They may have different exchanges, but both Forex and cryptocurrency trading platforms share many similarities. They are both designed to make it quick and easy to buy and sell currencies, as well as set up stop losses, place limit orders, and use technical analysis tools.
Their interfaces also have a stark resemblance to each other, making it easy for traders to quickly transfer between the two markets.
In Conclusion
At the end of the day, both the forex and cryptocurrency markets can be very profitable for traders who know how to take advantage of price movements in either market. Whether you are trading major currencies or digital coins, there is always an opportunity to make significant profits.
If you are already trading in one, you should also consider trading in the other to expand your opportunities. Here’s a guide for starting in the Forex market.
And for those who are new to financial markets, it is important to do your research and find a platform that works best for you. Whether that is Forex, cryptocurrency, or something else entirely!
