In this guide, I will try to give you an introduction to forex vs crypto vs stocks trading, what the difference is, which one is better, and which one you should choose in 2022 depending on your trading skills and risk tolerance.
This is a question that many traders are asking themselves and without proper guidance, it’s difficult to know where to start. Today I will show you a comparison table of these three markets that tells you everything you need to know about each market to make the choice better.
Which one is more suited for you and which one is safer to trade?
These are probably the most interesting questions of them all and in this guide, I will show you my theory on which one I think is easier to trade to make good profits. I will also give you a short description of the difference between forex vs crypto, crypto vs stocks, and stocks vs forex to further narrow down the facts.
Content table
Read our comparison table of forex vs crypto vs stocks trading below to gain valuable insights.
| Forex | Crypto | Stocks | |
| Market Size | Very large | Medium | Large |
| Regulation | Mostly regulated | Mostly unregulated | Mostly regulated |
| Difficulty | Very difficult | Difficult | Difficult |
| Initial investment | Less than $50 | Less than $1 | Less than $50 |
| Number of tradable assets | 10.000+ | 20.000+ | 50.000+ |
| Trading hours | 24 hours a day Mon – Fri | 24/7 | Mon – Fri 09.00-17.00 |
| Common market behavior | * Low volatility * Trending * News driven | * Extreme volatility * Pump and dump * Very emotional | * Medium volatility * Trending * Earnings driven |
| Long-term vs Short-term | More long-term | Both | More long-term |
| Technical analysis | Works very well | Not so well on short time-frames | Works well on longer time-frames |
| Momentum trades | Not good | Great | Good |
| Break-out potential | 2/10 | 10/10 | 7/10 |
| News dependant | Only on big news | Only on unexpected news | Yes, earnings releases are important |
| Accessibility | Easy (Global) | Easy (Global) | Medium (GEO dependant) |
| Demo trade | Easy to access | Easy to access | Easy to access |
| Risk factor | Medium / Low | High | Medium |
| Negative balance protection | Not always | Always | Not always |
| Long-term investment | Poor | Great | Good |
| Fees and Commissions | Cheap | Relatively expensive | Cheap |
| Arbitrage | Nearly impossible | Great possibility | Nearly impossible |
| Automated / Bot trading | Easy to access | Easy to access | Someone difficult |
| Leverage ratios | 1:1 – 1:5000 | 1:1 – 1:1000 | 1:1 – 1:100 |
| Volatility | Low | Extremely high | Medium |
| Liquidation risk | Medium | High | Medium |
| Bear markets | Does not exist | Yes, last between 3 – 24 months | Yes, last between 6 – 48 months |
| Bull markets | Does not exist | Yes, last between 1 – 8 years | Yes, last between 1 – 12 years |
| Liquidity | Extremely high | High | Very high |
| Profit potential | Medium | Extremely high | Medium / low |
| Trading platforms and brokers | * CFD Brokers * Forex Brokers | * CFD Brokers * Crypto Exchanges | * CFD Brokers * Stock Exchanges |
| Pros | * Relatively low risk with low leverage * Great for swing trading * Low spread commissions * Regulated brokers | * Great for day trading * High long-term potential * Easy to short-sell * Easy to predict * Open 24/7 for trading | * Good long-term potential * Very safe trading platforms * Low commissions * Good for both day traders and swing traders |
| Cons | * Difficult to predict * Very poor long-term potential * Bad for day trading * Not tradable on weekends | * Many unregulated exchanges * Difficult to trade on high leverage * Many exchanges charge high transaction fees | * Not tradable on weekends * Low profit potential * Not great for day traders * Does not offer very high leverage |
As you can see in the table above, there are some things that separate these three asset classes. What I find differentiates them the most is the trading hours, the regulation and safety of the trading platforms, the leverage ratios, and the difficulty to trade. In my opinion, cryptocurrencies are much easier to predict than for example a forex pair or a stock. I think this has to do with crypto being very immature at this moment and it is very easy to make good predictions that are correct and generates a profit.
The biggest differences between forex, crypto and stocks are:
If you’ve never compared how leveraged exposure works across markets, see our detailed guide on the mechanics of leverage for a deeper breakdown.
There are of course other factors that separate them but they do not impact how you trade them as a retail trader. For example, there is a huge difference in the size of these markets where the forex market is much much bigger than the crypto and stock market combined. However, this doesn’t matter in terms of how you set up your trading strategy since you will not have any problems at all entering the market with your size.
Another completely different thing is the number of tradable assets where there are plenty more stocks to choose from than forex leverage trading pairs and cryptocurrencies but this does not affect how you would approach each market since they are separated by their own markets and investors.
Other important factors that directly affect your trading are:
When trading either forex, crypto, or stocks it is essential to find a broker that is reliable and trustworthy where you can deposit your margin capital without worrying about losing your stake. I would trust CFD brokers more than I trust some unregulated crypto exchanges for example and this is a game-changer for some traders. High leverage trading in crypto can sometimes be a great addition to your toolbelt as long as you know how to handle the risks.
The fee structure is also another factor that can have a huge impact on your results depending on if you are a short-term scalper or a medium-term swing trader. Some CFD brokers have very favorable spreads while other crypto exchanges are more expensive due to being a new technology. When choosing between these asset classes you should think extra about how you trade.
The last thing that I want to mention is the profit potential and market behavior which are both significantly different between stocks, crypto, and forex markets. My personal opinion is that crypto generates more profits on good trades due to higher volatility but at the same time it’s a bit riskier if you are not used to the large price swings. Stocks have a very mild trending behavior where the profit potential is only good if there is a direct news play in the stock you are following.
In my opinion, this is the profitability ranking between forex, crypto, and stocks:
I think crypto is the more profitable asset class to trade simply because the momentum is incredibly high in the coins that get traction from the overall community. Cryptocurrencies tend to pump very hard initially and keep trending upwards for a few days up to a few weeks depending on the overall market trend.
Now, this of course comes with its downsides. Crypto is a very volatile market and if there is no real trend in play the market can be very choppy and throw you around for weeks and months before you start seeing good results.
If you are a trader who prefers a little bit lower risk with a semi-good upside, then stocks are the best choice for you. Most stocks are trending well once they get a reputation and are backed by a company that generates good revenue.
Keep in mind though that many small-cap stocks and micro-cap stocks are powerplays just like many cryptos and can fall hard without warning.
Forex is a very trading market that chops around gently except for big news releases such as interest rates, inflation, unemployment rates, gross domestic product (GDP), and U.S. nonfarm payrolls.
These events have the power to throw the market up and down in a very wild fashion and I recommend that you read up on forex news well before trying to trade them.
This is a factor that doesn’t concern investors who use leverage in long-term investing that much but it is a true make-it-or-break-it deal for scalpers and day traders. Here is my take on the cheapest market to trade:
Now, the cheapest market to trade is by far the forex market, and here is why. The forex market has been around the longest and the amount of competition among forex is at an all-time high.
This means that for every new forex broker that enters the market, the spread and commission shrink a little bit to offer something better than what already exists.
Keep in mind that both stocks and forex can be traded on CFD brokers which means that stock trading comes in second place in terms of cost of trading and if you want to have a good variety and low fees, the best thing you can do is to join a reputable CFD broker.
So, what about cryptocurrencies? Are they that expensive to trade or is it just a honeymoon period for all the crypto exchanges that have entered the market first?
No, crypto is not very expensive to trade in reality, it’s just that forex and stocks are extremely cheap to trade. You will get by with a trade fee of less than 0.05% on some exchanges that are regulated by a government body.
Overall, crypto is the latest market to this mix and I think it’s not going to take long before crypto is the number one cheapest market to trade. Only time will tell but if things keep moving in the same direction then cryptocurrency trading will lead the way in a few years.
When it comes to being beginner-friendly it’s a tie between all of these markets and it’s difficult to say which one is easier to access and easier to trade.
This completely depends on each individual and where you live.
For example, the USA has a booming stock trading community while Europe is in a crypto craze that is growing each year.
Judging from how the trading platforms are structured and the ease of use I rank the three markets like this:
Crypto comes in the number one spot as the most beginner-friendly market to trade simply because of the user-friendly cryptocurrency exchanges that have emerged during the past years. When registering with a crypto exchange, you don’t need to send in KYC documents in an instant before opening a trade, this can wait until later which is something that many traders will find very comfortable.
Some CFD leverage trading platforms that offer forex and stocks are very reluctant to let traders use the platform before all the KYC documents have been sent for approval. I see this as a barrier in many ways and I think many traders will choose crypto trading in 2022 simply because the on-ramp is so well streamlined.
In general, derivatives trading increases risk of liquidation but is more prominent in digital assets than it is in other markets due to the wild price swings and the overleveraged accounts.
When comparing forex vs crypto it is self-evident which is best suited for novice traders, professionals, and semi-advanced traders.
The biggest factor between these asset classes is that fx is much more long-term or swing trading oriented than digital assets.
Bitcoin for example, which is the larger cryptocurrency by market cap, has the potential to fall or rise more than 20% in a day. This is not going to happen in the EUR/USD currency pair.
If you are looking for stability in terms of a good broker that is trusted I would go with FX for sure.
There are still many bad actors in cryptocurrency trading and most of the platforms are still unregulated and offer leverage ratios of up to 100x leverage.
The commissions are also lower in fx and many active traders will have a lower cost by choosing that market.
If your game is pure profitability and you are interested in trying something new then digital assets are the best choice for you.
Keep in mind though that you need to start with a good leverage ratio to not get wiped out immediately.
The biggest difference between forex and crypto is that the fx market is heavily regulated compared to the crypto space. This is because fx has been around for a very long time and cryptocurrencies just entered the marketplace as a tradable asset. The safety of choosing fx before crypto is obvious but if you are looking for quick results as a short-term trader you better take a look at coin trading first. Fx is like the old experienced uncle while crypto is like the new young teenager that is full of energy. Below are three factors that separate these asset classes:
If you are choosing between these two asset classes you should know some things before you make your final decision. Some traders are much better off trading stocks than digital assets and of course the other way around.
If you are looking for a stable and tested product that works well in all time frames and is supported by well-established platforms then stocks might be a better option.
Keep in mind that pure stock exchanges don’t offer that much leverage and to be able to trade on high leverage you have to seek out a CFD broker.
The only difference is going to be that your local stock exchange might offer better deals in terms of loans and interest payments while an international CFD broker will probably offer better products and more stocks that offer leverage.
There are some big differences when comparing these markets and I wanted to discuss some of the most important factors that separate them.
While both a great for both short-term and long-term traders they have different behaviors due to one being traded 24/7 while the other is only traded during “office hours”.
This is of course something that can be analyzed and later predicted, but it’s something to keep in mind going forward.
These two giants have been at war for a long time and it’s almost like watching two football teams battle it out for the most attention.
One is dominated by wall-street trading while the other receives more liquidity from different nations and super funds that move large amounts of money.
This creates different behaviors such as long trends in forex and market manipulation in popular names such as Tesla and Netflix.
The game between these two markets is tight and there are many benefits and drawbacks on both sides that make me think twice before choosing. I like fx because of the high leverage ratios that CFD brokers offer but at the same time, I like how predictable a stock is once it gains some traction. However, below is a list of the biggest factors that I can list.
Crypto can be more profitable than foreign exchange trading simply because of the momentum that is in the crypto markets. Coins have the potential of pumping very hard and keep trending for many days and weeks if the overall market conditions are positive.
Even though it is very difficult to make it as an fx trader, it is possible to become financially independent. You need to be an expert technical analyst and at the same time, you need to know some macroeconomics to know where the global capital is moving in order to predict which forex pairs are going to do well.
No, the crypto market is not even 1% of the size of the forex market. National currencies, or the foreign exchange market is the largest in the world with over $5 trillion in volume traded each day.
The biggest similarity between cryptocurrencies and forex is that they have longer trading hours, they are easy to access, and the leverage ratios offered are very high.
Yes, in a way coins and stocks are both pieces of ownership in a company where the business sells part of its company in order to raise capital. However, the structure of how a cryptocurrency is set up is completely different from stocks. The behavior of these markets is also very different whereas cryptocurrencies are very traded on heavy emotion compared to stocks that are traded more based on earnings potential.
If you are looking for a stable and regulated broker and low commissions that forex is a good choice. However, if you are a day trader looking for momentum and volatility, then crypto is the better choice for you.
In this tutorial, I have explained the differences between forex vs crypto vs stocks in leverage trading for you to choose the best market for your style of investing or day trading. Some subtle differences don’t affect the way you trade the market and some larger differences completely change the game.
The most important factors when choosing between forex, crypto, and stocks are the way the brokers are set up, the trading hours, the volatility, and the market behavior in general. Below are some final points to help you pick your market.
If you are a brand new trader I would recommend starting slow in forex and then moving on to stocks for some good long-term gains. However, if your play is very short-term oriented you can start in cryptocurrency trading as long as you choose a reputable broker and relatively low leverage ratios. Good luck!
This article is published under Leverage.Trading’s Risk-First Education Framework, an independent learning system built to help traders quantify and manage risk before trading.
