What is the difference between these markets?
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:
- Trading hours
- Leverage ratios
- Trading difficulties
- Brokers with regulations
- Accessibility
- Volatility
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:
- Different fees
- Trading platforms
- Risk factors
- Market behavior
- Profit potential
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.
The reason why brokers give leverage in all these asset classes is first of all to increase revenue but also to attract more traders by offering more markets. Traders who leverage up in crypto will find a lot of help reading our crypto leverage strategy guide.