Forex vs Crypto: What’s Better For Beginner Traders? (2024)

The crypto and forex markets are two of the world’s most popular among investors and traders. Most people with positions in one or more assets hoping for a spike in value usually have funds deposited in at least one of the markets. Sometimes, more experienced traders have money in both markets simultaneously.

Both forms of investment are popular in 2024 and have returned considerable profits to investors over the last few years. People with more experience are already used to their preferred market and know how to choose trades, deciding when to buy and when to sell. That is because trading in either market can sometimes be a gamble, requiring in-depth knowledge to reduce the risk of loss. While this is familiar territory for old hands, beginners usually need help figuring out how to start. Regardless of the preferred market, the best way to trade is to begin by understanding the intricacies of each market and learning about potential risks and possible rewards.

What is Crypto Trading?

Cryptocurrency trading is simply buying and selling digital assets on an exchange and speculating their value or price trajectory to make a profit. Traders speculate on cryptocurrencies by buying at low prices and selling them only when prices rise. Crypto trading occurs on exchange platforms or peer-to-peer marketplaces, where traders exchange numerous cryptocurrencies. Popular options include Bitcoin (BTC), Ether (ETH), Solana (SOL), Cardano (ADA), and Dogecoin (DOGE). Traders may also consider less popular assets, like the options reviewed and ranked here.

In addition to buying assets and holding them until they rise in value, traders sometimes use shorting, speculating that an asset’s value will fall. Short traders sell assets when the prices are high and then repurchase them when prices drop.

What is Forex Trading?

Forex (“foreign exchange”) trading is buying and selling different currencies by speculating on currency movements to make a profit. With forex trading, participants speculate on the fluctuations between currency pairs. For instance, a trader may buy the EUR/USD pair, believing the euro will rise relative to the dollar. If this happens, the trader makes a profit by closing their position and selling the EUR to repurchase USD.

The forex market is the world’s largest and most liquid financial market. As in cryptocurrency trading, forex traders use various strategies, including short selling. This requires traders to borrow a currency, hoping its value will decrease, sell it on the market, and wait to repurchase it at a lower price. While different currency markets close and open, most trading activities usually happens when a majority of markets are available simultaneously. This increases liquidity but also makes prices more volatile.

Comparing the Crypto and Forex Markets

Several points of comparison are needed to understand the forex and crypto markets. While both sectors can be similar in many ways, they are distinct in some. The following are a few things that help to understand both types of trading:

Market Hours

The crypto and forex markets are accessible to everyone, regardless of experience or location. Anyone can buy an asset or deposit funds to trade on a currency pair. However, only the crypto market is open 24/7. At almost any time, traders can buy, sell, or otherwise trade digital assets. These trades can happen day or night, weekday or weekend. Unfortunately, the forex market is only available 24/5. Most forex markets are structured, opening five days a week, and remaining closed on weekends or some public holidays.

Accessibility

Both markets are accessible to all interested traders, including experienced and novice participants. However, there are a few differences in accessibility. For instance, cryptocurrencies have a lower barrier to entry. Firstly, since most decentralised cryptocurrencies are infinitely divisible, beginners can start trading digital assets with as little as $10. It is also easy to register an account at any crypto exchange to begin trading. Furthermore, the decentralised nature of crypto platforms means that anyone can trade without worrying about the requirements that are typical of traditional systems.

Volatility

Although both markets are volatile, digital assets are notorious for their instability. The forex market is also volatile and poses risks even for experienced traders. However, the value of cryptocurrencies can fluctuate heavily, causing investors to gain or lose significantly.

Factors to Consider When Choosing Forex or Crypto

The following are factors beginners must consider when trying to decide between the forex and cryptocurrency markets:

Investment Goals

Traders need to decide their financial goals before choosing either market. For instance, people looking for quick gains who are only interested in short-term trading might prefer to trade cryptocurrencies. That is because digital assets are more likely to offer quick profits. On the other hand, people interested in gradually accumulating wealth for the long haul may be better suited to forex trading.

Market Hours

Beginners may also consider the market hours for each option. Cryptocurrency trading may be easier because since the market runs 24/7, traders may decide to initiate and close trades at any time without restrictions. However, since trading on the forex market is limited, beginners must consider their adaptability to market hours. Individuals who find it difficult to enter the market at the best possible times, depending on preferred trading pairs, may perform better in another form of investment.

Risk Tolerance

Traders must also measure their risk tolerance and how much money they are willing to lose. The crypto market is very unstable, with high-risk trades for the most part. Traders willing to monitor the market and make quick gains while understanding the high risks may prefer digital assets. However, people with a low-risk appetite or a more steady and measured strategy may focus on the forex market for long-term stability.

Commitment to Learning

All beginners must take time to research and learn about each market before choosing. The time required to learn complex economic concepts and understand the financial market may make all the difference in favour of forex markets. Alternatively, people going into crypto trading must also learn blockchain fundamentals and understand how the crypto market works before trading. Apart from the time needed to learn these concepts, the ability to comprehend them also matters. Some beginners might find it easier to learn about crypto, while others might think blockchain technology is too complicated.

Regulatory Clarity

Unfortunately, there is more regulatory clarity in the forex market than in the crypto industry. Forex trading is well regulated worldwide, providing traders with heightened security and assurance that the trades are legal, and funds are safe. However, cryptocurrencies are less regulated and may present risks to some some traders.

Making a choice: Forex or Crypto?

Several factors inform a person’s decision to trade in the forex or crypto market. Generally, the final decision boils down to personal preference and each person’s assessment of related factors, including investment goals, accessibility, risk tolerance, regulatory clarity, and commitment to study. Regardless, all beginners must start with research to understand the pros and cons of each type of trading and must learn to approach both markets with caution.