Occasionally trends appear in financial trading. Not the trends you search for on your forex trading charts if you’re a swing trader, the types of movements we refer to and want to discuss are more like popular fads.
Think of cryptocurrency trading lately, many of us didn’t think we’d see its popularity get back to the mania we witnessed in 2017, but here we are. In December 2020 Bitcoin is trading close to record highs. Meanwhile, marketers are busily sending out emails advising you to buy into the mania before it’s too late.
Similarly, equities trading, or rather investing, has been all the rage since the US equity markets began a recovery after the initial Covid market collapse began to reverse, once the Fed and USA government came to the rescue with massive levels of stimuli.
The rise in the SPX 500 and NASDAQ 100 from April onwards has been unprecedented and stunning. So, it comes as no surprise to learn that over the past eight months, investors have opened millions of new accounts with brokers such as Robinhood and E-Trade to chase the market and hype up.
Some investors have developed skills using options markets; they are giving themselves the rights but not obligations to buy or sell securities at pre-determined prices at a fixed date, they’re trading rather than investing.
However, there are many issues with investing in equities and even more problems if you attempt to trade cryptos and we’ll discuss a few of them here. We’ll then compare FX trading with crypto trading leading to the conclusion that forex trading for many retail traders makes perfect sense.
The problems with equities investing or trading
If you buy and hold individual equities, you need quite a pot of cash to generate realistic and reasonable returns. You’re highly unlikely to get a margin facility off your broker if you’re a private investor, and you’ll probably pay a hefty commission on each investment you make. There’s also no leverage available.
Now you could trade (buy and sell) various equities through a CFD broker if you’re a European based trader. But you’ll get very little leverage, you’ll use more margin, and the spreads and commissions you’ll pay are relatively high in comparison to other securities.
The problems with cryptocurrency trading
Investment and trading forums are currently mobbed by traders who held their nerve and kept invested when Bitcoin dropped from 19,000 to below 4,000 inside twelve months. Of course, many drive a Lamborghini Huracan and use their Urus for weekends. Never believe what you read on trading and investment forums.
The drop BTC suffered in 2017-2018 illustrates just how volatile the security is, and, notably, 95% of BTC is still owned by 5% of investors. In short, nothing has changed with BTC. Sure, exchanges aren’t crashing anymore, and there are fewer talks of scandals and missing ledgers. But the concept hasn’t changed, and this second wave of mania could be hype 2.0.
Anyhow, let’s concentrate on the practicality of trading BTC and other cryptos. Before we do, it’s worth mentioning that as of January 2021 you can no longer trade cryptos through FCA regulated brokers, because they outlawed it.
Let’s concentrate on that for a moment; despite the massive rise in price and subsequent surge in trading cryptos have experienced during 2020, the FCA has banned any form of CFD type trading in it. There’s a confidence vote right there.
Comparing crypto trading to FX trading
- Trading cryptos you might experience spreads of 15 versus spread quotes of 0.5 with a currency pair like EUR/USD.
- Trading cryptos you might experience an average range of 15% in a day, whereas, with FX currency pairs, it might be a 1-2% daily trading range.
- There is no leverage available with cryptos, with FX pairs you’ll get up to 1:30.
- The margin for trading crypto will be far more significant because you’re getting no leverage.
Trading FX in a conventional manner has never made more sense. During the turbulent trading conditions witnessed during 2020, we’ve seen massive swings and increased volatility in many FX major currency pairs. Consequently, the spreads, fills and trading opportunities have been excellent.
With FX trading you don’t need fortunes to begin trading, you can operate a $200 micro-FX account to become skilled and get familiar with the complete process. You’re also trading in the largest marketplace ever created, that massive liquidity ensures you’ll always get low spreads and good service.
With these reasons and the comparisons mentioned above versus crypto trading, we’re providing evidence that FX trading isn’t a trend or popular fad. Our forex trading business is trustworthy, reliable, has stood the test of time and will be here for many years to come.