How to trade crypto, stocks, or forex? It is similar but at the same time different from other trades, for example, stocks or forex. At first, we have to define the difference between crypto and Forex or stock trading because you have to have theoretical knowledge.
What is crypto trading
Crypto trading is simply the exchange of cryptocurrencies. Just like in Forex. In crypto trading, you are buying and selling a cryptocurrency for another. It’s the same as you buy Bitcoin or altcoin for USD and Euro.
What is the Forex market
Forex, also known as FX, or currency market is where you can trade currencies. The forex market isn’t centralized. It is, also, OTC or over-the-counter market. Here you can buy, sell, or exchange currencies at determined or current prices. So, it operates like any other market.
What is stocks trading
In short, it is the buying and selling of company stock – or derivative products based on company stock – in the hope of making a profit.
Let’s go further!
How to trade crypto
Honestly, all of these types of investments are risky. Crypto gives greater growth than stocks or forex.
You all know all about the Bitcoin. Well, Bitcoin isn’t the only digital currency that you can trade on the market. It is really the first and most popular one and is the real digital gold in the industry. The most important part behind cryptocurrencies is the technology that holds a large part of their value. The technology is what provides a safe way to identify a transaction and, also, the way to transfer currency or fiat money in exchange.
If you want to trade crypto you need as first:
1) A cryptocurrency wallet (or two).
2) An exchange or platform to trade on.
3) By using a bank account (find more HERE)
There are only a few things, but important, you have to know about trading cryptocurrency.
Trading cryptocurrency is simple to start, but there are some essential aspects to understand before you start trading and this is basic friendly advice to mull over, not professional investment advice.
I’ll explain an example of Bitcoin.
How to trade crypto
Firstly, you’ll have to buy the underlying asset from an exchange or online broker.
If you want to protect your Bitcoin, you must have underlying. That’s the best way. However, you’ll have to take some reasonable steps to reduce the risk of Bitcoin stealing and loss of private keys. The steps are simply a diversification of holdings across different wallets/storage types. Keep in mind that you’ll need two-factor authentication and strong passwords.
Further, you can trade a CFDs derivative and hold a cash margin.
If you want to trade on Bitcoin for a short or medium period find, use an online forex broker that will provide you 24-hour trading. Also, ask for the potentially lower margins, and also, the ability to go long or short. Choosing the right broker is very important. Your broker has to provide you the best trading tools and favorable commission rates.
It is always smarter to buy a publicly listed security linked to Bitcoin and hold that shares with an online broker.
Stock investors, investing in Bitcoin through listed security, for example, ETF or ETP, could be suitable. Especially for investors that prefer taking a passive position. More active traders might notice that the limited trading hours and possible lack of volume are limiting factors. That could limit their trading indeed.
Overall, using listed securities that invest, track, or hold Bitcoin can be a viable alternative to diversify away from the risks of margin trading or safeguarding private keys when buying the underlying.
How to trade forex
You can trade currency based on what you think its value is, if you think a currency will increase in value, you can buy it. If you think it will decline, just sell it.
In forex trading, you’re betting on the value of one currency against another.
For example, EUR/USD, which is the most-traded currency pair in the world.
EUR as the first in the pair is the base currency, while USD, as the second, is the counter. Read more HERE
When you see a quoted price, that shows how’s much one euro worth in US dollars. Also, you’ll always see two prices. That is because one is the buy price and the other is the sale price. The difference between these two prices is the spread.
When you choose to buy or sell, you are actually buying or selling the first currency in the pair.
If you think the Euro will rise in value against the dollar, you buy EUR / USD. And vice versa, if you believe the Euro will drop, you sell EUR/USD.
If prices are quoted to the hundredths of cents, how can you see any return on your investment when you trade forex?
When you trade forex you’re borrowing the first currency in the pair to buy or sell the second currency.
To trade with leverage, you just set aside the necessary margin for your trade size. If you’re trading 200:1 leverage, for example, you can trade $2,000 in the market while only setting aside $10 in the margin in your trading account. Still, leverage will not just increase your profit potential. It can also increase your losses. If you are new to forex, you should always start trading with lower leverage ratios, until you feel comfortable in the market.
How to trade stocks
Stock markets are places where buyers and sellers of shares meet and decide on a price to trade.
It is important to know that the corporations listed on stock markets do not buy and sell their own shares on a regular basis. You have to know that you\re not buying shares from the company, you are buying it from some other shareholder.
There are many stock exchanges, many of which are linked together electronically which means markets are more efficient.
The prices of shares on a stock are established through an auction process
The prices of shares on a stock market can be set in a number of ways, but most of the most common way is through an auction process where buyers and sellers place bids and offer to buy or sell. A bid is a price at which somebody wishes to buy, and an offer (or ask) is the price at which somebody wishes to sell.
When the bid and ask coincide, a trade is made. If there are many buyers and sellers at higher and lower prices, we say the market has good depth. Stocks are quoted by their ticker symbol, represented by between one and four capital letters, which are often loosely representative of the company name.
Market orders are simply orders that direct your broker to buy or sell shares at the best possible price. A market order doesn’t guarantee the price, but it does ensure that you’ll get the number of shares you require. When an order is completed, it is said to be filled.
Stop orders are contingent on a certain price level being attained to activate the trade and your trade will be executed only when what you want to buy or sell reaches a particular price.
If you understand how the financial markets are structured you can use the same skill and experience to profit in all three.
It’s the same, you buy low and sell high against the crowd. There is no difference.