The Difference Between Crypto, Forex, & Futures

Traders today are spoiled for choice. Brokers offer cryptocurrencies, indices, futures, and forex, amongst other assets, but which one is better? It’s an impossible question to answer until you first decide what your financial goals are, how much risk you’re prepared to take on, and how much time you are willing to spend each day. Here’s a breakdown of the most popular choices so you can trade the assets that suit you best.

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What kind of trader do you want to be?

Before you can decide which market you want to invest in, you might want to think about what kind of trader you want to be. Would you like to set short-term trades that you will close by the end of the day? Or does your analytical eye best suit long-term trades that stay open for days, weeks, and even months? Some markets are riskier than others, some offer much higher returns, others require hours of research and technical analysis. Let’s look at the options.

Trading futures & metals

Futures CFDs offer long-term investment opportunities. Price swings for oil, gas, gold, and other precious trading instruments have a history of long trends. The rises and falls can be compared to the seasons in their repetitive behavior and timing. Metals offer attractive trading conditions such as low spreads, and energies rarely experience massive volatility. For XAU (gold), and XAG (silver), Exness offers favorable trading conditions, and—thanks to the various trading platforms available—you’ll be able to react fast to the price changes.

Futures contracts also offer short-term trading for the more dynamic traders, but profiting from futures can demand the use of higher leverage. If you are planning to do a little futures day trading, beware; a political drama can cause massive price spikes in the short-term. Recent news of an alleged Iranian rocket attack caused sizable and misleading price swings. Many mainstream news outlets warned of oil price increases, but FX News correctly forecasted a price fall ahead of the world media and gave Exness traders an early bird alternative perspective. If politics is involved, you’ll need to keep an open mind when doing your fundamental analysis. Stay current on news from the Middle East if you choose to trade oil.

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The cryptocurrency market

The crypto world is perhaps the most volatile option of the bunch. This is the nature of any trading instrument that uses scarcity in its growth model. When there are a lot of coins available, prices are low. As investors buy coins, the availability decreases and the price increases. This kind of pricing model means big investors tend to buy when very low, then dump everything after a global hype pumps up prices. Crypto is just like a bubble, so you need to get in on the action when the world first starts to “blow”, and get out before it bursts. In other words, investing before the expansion and closing your order before the crash is how crypto traders maximize profits.

Over the last few weeks, cryptocurrencies have seen an incredible awakening. Bitcoin is already much higher than 2017 Q2 price levels, and global interest is still rising. Litecoin, Bitcoin Cash, Ethereum, and XRP all show no signs of slowing, but if history does repeat, you’ll need to watch the markets very closely in the coming months. One trading tool that only forex brokers offer is a Trailing Stop, which is a very powerful tool that helps traders ride unexpected price highs but provides an automatic exit at the first sign of a coin dump.

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The foreign exchange market (forex)

By far the biggest and most popular trading instrument in the investment world, forex has a staggering daily turnover of $5 trillion. As the world’s banks and corporations trade their currencies internationally, so can you. Forex offers opportunities for both short-term and long-term traders, with both stable and volatile currency pairs for both the brave and the conservative.

Like all the other investment options we’ve mentioned, technical analysis plays a big part in forecasting prices. For those of you less technically minded, one great indicator of coming price changes is the global economy. This means watching international news every day, reading the financial sections of your preferred news feed, and joining trading forums to discuss and speculate about upcoming events. Political instability can heavily influence a nation’s currency.

Suit yourself

If you prefer the idea of brief technical analysis, no valuable fundamental indicators, and massive unexpected price moves that can generate huge profits and rapid losses, then go with cryptocurrency trading.

For traders looking to set trades and sit back for a longer period, energies and metals might suit you better. You’ll still need to make regular fundamental analysis and monitor international news, but leaving a futures trade open and running for weeks and months is not uncommon, and if your leverage is high enough, you might get a nice surprise when you least expect it.

Alternatively, if you want both short-term and long-term trading opportunities with modest starting capital and high leverage options, then forex is the one for you. Starting capital can be modest for those of you with a small budget, and both technical and fundamental analysis offer insights into coming moves—and you won’t need to spend more than an hour or two researching.

Whichever way you go, just remember that trading on any kind of market can be risky. For the first few weeks, you’d be wise to take your time, diversify with multiple small trades—each with modest Take Profit goals and tight Stop Losses. As your experience grows, so can the amount you are willing to invest and the level of leverage you can use to multiply your open positions.     

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Disclaimer: the publication of analysis is a marketing communication and does not constitute investment advice or research. Its content represents the general views of our experts and does not consider individual readers’ personal circumstances, investment experience or current financial situation. Analysis is not prepared in accordance with legal requirements promoting independent investment research and Exness is not subject to any prohibition on dealing before the release of analytics. Readers should consider the possibility that they might incur losses. Exness is not liable for any losses incurred due to the use of analysis. Risk warning: CFDs are leveraged products. Trading them carries a high level of risk, so it is not appropriate for all investors. The value of investments can both increase and decrease and an investor may lose all of their invested capital. Under no circumstances shall the Company have any liability to any person or entity for any loss or damage in whole or part caused by, resulting from or relating to any transactions in CFDs. © 2008—2019, Exness