Forex cryptocurrency: How to choose what to trade
By Danny Mawas
INFINOX Regional Director.
Trading in cryptocurrency in Africa is growing rapidly in popularity. This can be attributed to a tech-savvy population that has already quickly embraced digital payments via mobile. However, trading Forex has also seen increased growth in the country with an estimated 1.3 million traders recorded in Africa.
With this growth, there are many potential traders who want to start trading but are uncertain which currency to choose in this complex environment.
Before launching into trading, it’s important to do careful analysis. Identify your personal goals, resources and risk tolerance before choosing your risk and trade management strategies. It’s also crucial to spend time researching and analysing both markets before trading.
Firstly, it is important to know the differences between the two as they are vast and can be compared to the proverbial apples and oranges. Crypto currency trading is trading digital or virtual currencies that are secured by cryptography, the most famous example being Bitcoin. Trading takes place on relatively new decentralised platforms using blockchain technology, a system which makes it almost impossible to change, hack or cheat.
Forex is foreign exchange, or FX, and takes place in the largest, most liquid, well established global markets. Volumes of up to US$6.6 trillion are traded daily using 150 government-backed national currencies.
When it comes to choosing what to trade, it’s important to take note of the liquidity of the Forex market versus the crypto market. For example, with Forex traders buying and selling these high volumes daily, it creates a liquid market that offers opportunities for all types of traders. Additionally, Forex instruments also provide leverage as well as plenty of trade opportunities thanks to its volatility, thus making it an easy instrument to trade.
The foreign exchange market allows private individuals, large institutions, governments, retail traders and more to participate. Essentially trading Forex is less risky, more protected, regulated and stable. It enables investors to react to market movements, and is influenced by political or economic factors which prompt investors to enter or exit the market accordingly.
Trading crypto, however, can be more risky as there is less information and fewer case studies to predict performance. There are less established markets and although there may be a promise of larger returns there is no profit guarantee, but a long-term option for potential profit.
For those that wish to start trading Forex there are tried and tested strategies that beginner traders can consider. A viable way to learn and kickstart your trading journey is via online community apps, such as IX Social, where traders can share knowledge, trades and experiences with like-minded traders. Users are put in the driving seat with the latest news, community trending topics, top trades of the day and the latest prices all in one place.
Its easy-to-use functionality, coupled with an auto-copy feature that allows traders to automatically copy the top traders to receive the same results, makes it the ideal platform for beginner traders to learn and grow.
Whatever currency traders decide to trade in, it is important to not let your emotions take over. Trading based on an emotional impulse often results in traders buying and selling at inopportune times.
While trading offers great benefits, it is vital for traders to follow a strategy and to start simple. This will ensure their longevity, and prosperity, in the game.