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- If you understand how the financial markets are structured you can use the same skill and experience to profit in all three.
At first, we have to define the difference between crypto and Forex/Stock trading because you have to have theoretical knowledge.
– Crypto trading, or cryptocurrency trading, is simply the exchange of cryptocurrencies. Like in Forex, you can also buy and sell a cryptocurrency for another, like Bitcoin or altcoin for USD and Euro.
– The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This includes all aspects of buying, selling and exchanging currencies at current or determined prices.
– Stocks trading 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
Crypto shows bigger growth than stocks or forex. Honestly, all of these types of investment are risky.
While Bitcoin is not the only digital currency on the market, it is indeed the first and most popular one and stands as the digital gold within the industry. The technology behind cryptocurrency holds a large part of its value. The secure way to identify a transaction and the way to transfer funds.
If you want to trade cryptocurrency you need:
1) A cryptocurrency wallet (or two).
2) A cryptocurrency exchange (or two) to trade on.
There are only a few things to know about trading cryptocurrency.
Trading cryptocurrency is simple to start. Yeah, it’s easy.
But there are some essential aspects to understand before you start trading. And this is basic friendly advice to mull over. This not professional investment advice.
I’ll explain on the example of Bitcoin.
There are three ways you can trade Bitcoin:
1 Buy the underlying from an exchange or online cryptocurrency broker
For those who are willing to actively safeguard their Bitcoin, owning the underlying is clearly the way to go.
But prudent steps must be taken to mitigate the risk of Bitcoin theft or loss of private keys.
Diversifying holdings across wallet types, using two-factor authentication and strong passphrases, can be helpful.
2 Trade (buy/sell) a CFD (Contract for Difference) derivative and hold cash margin with an online forex broker or multi-asset broker.
Active traders looking to speculate on Bitcoin over the short or medium term can count that using an online forex broker will provide them with 24-hour trading. And potentially lower margin, and the ability to go either long or short.
So, it is good!
Because of counterparty risk, choosing a broker is just as important as finding one with the best trading tools or commission rates.
3 Buy a publicly listed security related to Bitcoin and hold shares with an online stockbroker.
For stock market investors, investing in Bitcoin indirectly through a listed security such as an ETF, ETP, or trust may be suitable for those looking at taking a passive position.
Active traders might find the limited trading hours and potential lack of volume a limiting factor that could hinder their trading.
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
Forex, also known as foreign exchange, FX or currency trading, is a decentralized global market where all the world’s currencies trade.
You can trade currency based on what you think its value is. Like, for instance, you think a currency will increase in value, you can buy it. But, if you think it will decrease, you can sell it
All forex trades involve two currencies because you’re betting on the value of a currency against another. Think of EUR/USD, the most-traded currency pair in the world.
EUR, the first currency in the pair, is the base, and USD, the second, is the counter.
When you see a price quoted on your platform, that price is how much one euro is worth in US dollars. You always see two prices because one is the buy price and one is the sell.
The difference between the two is the spread. When you click to buy or sell, you are buying or selling the first currency in the pair.
Since the euro is first, and you think it will go up, you buy EUR/USD. If you think the euro will drop in value against the US dollar, 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? Leverage!
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 simply set aside the required 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.
However, leverage doesn’t 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. When you buy a share of stock on the stock market, you are not buying it from the company, you are buying it from some other existing 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 market can be set in a number of ways, but most 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 sequentially higher and lower prices, the market is said to have good depth.
Stocks are quoted by their ticker symbol, represented by between one and four capital letters. They are often loosely representative of the company name.
Let’s break down what is the market order!
A market order is simply an order that instructs the broker to buy or sell shares at the best available price. The market order does not guarantee the price you will get. But it does guarantee that you will get the number of shares that you want.
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.
In all three you have to buy low and sell high against the crowd.
There is no difference.