Stocks vs. Forex vs. Cryptocurrencies: What Aspiring Traders Need to Know

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Thanks to the ever-evolving internet, it has become very easy to trade financial assets. Whereas in the past, stock investors and forex traders would have to contact brokers on their phones or in person, today they can trade nearly instantaneously on websites and apps.

Meanwhile, assets like crypto that were born on the internet have grown in popularity as apps and social media have evolved to support and highlight them. Indeed, a report by Business Insider last year revealed that the number of cryptocurrency users worldwide had surpassed 100 million –– and the user population was still growing by an incredible 16% per month.

Clearly, today’s traders are spoiled for choice. But how, now, should one go about deciding which assets to trade? Below, we’ll go over the basics of the popular options of stocks, forex (or foreign currency exchange), and crypto to help aspiring traders make informed decisions regarding which markets to engage in.

Value as Investments

The value of stocks depends on company growth. On the other hand, the value of a currency hinges on its county’s economy. The value of cryptocurrencies is based on demand, mainstream perception, and often enough new developments (given that cryptos represent a young, emerging market).

Both fiat currencies and cryptocurrencies were created to be mediums of exchange, but can be resold for profit when prices change. On the other hand, traders who buy stocks may get value out of their investments even without reselling, through dividends or shareholder privileges.

If you’d prefer to trade less actively, cryptocurrencies and stocks can both be used as long-term investments. Stock prices tend to increase over the long term when things are going well, given that the corresponding companies are not limited in their growth. Cryptocurrencies, meanwhile, have yet to realize their full demand potential, which means it’s possible to hold coins and wait for wider mainstream adoption to boost value. Where fiat currency in the forex market is concerned however, it is more common for investments to take the form of short-term trades, with the intent being to capitalize on smaller and more frequent changes.

Volatility

Because they are tied to companies and countries respectively, stocks and currencies tend to be at least somewhat more stable than cryptocurrency –– though both are still subject to dramatic price fluctuations on occasion. By and large however, cryptocurrencies are far more volatile by comparison. This makes them riskier, but also means that they provide opportunities for traders to make large profits in relatively short time and with fairly small investments.

Platform Support

Trading platforms for stocks, forex, and cryptocurrencies usually offer some kind of support to help beginners ease their way into trading. Stock traders have a lot of options when it comes to trading platforms. The trading platform eToro, which can be used to trade stocks, currencies, and crypto, offers weekly webinars that go over the basics of trading. Dedicated forex traders, on the other hand, can look into Trading Station, MetaTrader 4, and NinjaTrader. As outlined in FXCM’s summary of Forex trading platforms, these options offer advanced analytics and charting tools, which can help traders make informed decisions. Like eToro, NinjaTrader can also be used to trade both forex and stocks.

Meanwhile, the two most popular platforms for trading cryptocurrencies are Binance and Coinbase. As mentioned in our review of Binance, this particular platform also offers a beginner exchange service, which can help new users transition. It also includes advanced charting applications, which traders can use to get detailed information on historic price movements and patterns.

Liquidity

When we say liquidity, we’re functionally talking about how easy it is to convert a certain asset into cash. Between stocks, forex, and cryptocurrencies, the forex market is the most liquid by far. Since stocks and cryptocurrencies are usually seen as investments, traders tend to hold these assets for a long period of time. Thus, the trading scene is not as active, and it may take traders a longer time to sell their assets for their desired prices. On the other hand, it is rare for forex traders to hold currencies for more than a few days at a time. This, plus the fact that the sheer volume of currency trades taking place worldwide is overwhelming, makes it easier for forex traders to quickly sell holdings for desired prices.

Of course, there’s nothing stopping traders from dabbling in stocks, forex, and cryptocurrencies all at the same time. Some would even recommend this as a form of diversification. Just make sure to do enough research to ensure that every trading decision you make is informed.

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