Both Forex and cryptocurrency trading have become highly popular and potentially lucrative investment avenues for traders in South Africa.
While they both operate on the same premise – speculating on price movements – they differ fundamentally due to the fact that Forex trading deals with fiat currencies while crypto currency trading deals with digital currencies.
In this article, we take a closer look at the pros and cons of both trading styles.
The pros and cons of Forex trading
The practice of trading currencies on the Forex market with the hope of seeing the value of the currency you’ve purchased rise has been around for many years. In currency trading, the dynamics that drive supply and demand can have a substantial impact on the global economy.
For MetaTrader 4 Forex brokers, speculating on the Forex market has the following advantages:
- Low costs: There are no commissions or regulatory fees, thus there are no high overhead expenditures. Anyone can start trading forex with a small amount of money using a broker like Khwezi Trade.
- High liquidity: There are numerous buyers and sellers on the market. As a result, market manipulation and price anomalies are less likely to occur.
- Market size: Because of its size, it’s also one of the most diverse in terms of product types. There are a wide variety of currency pairs, trading techniques, and analytical tools available from a broker like Khwezi Trade.
- The Forex market is regulated creating a safe environment for traders to have peace of mind.
And the following disadvantages:
- Higher risk: If you’re a leveraged trader in the forex market, you might lose all of your money if the price of the currency you’re trading drops even a few cents. Therefore, it’s important to apply good risk management and set stop losses.
- Less support: You can’t rely on anyone for advice, not even the experts. A forex trader must understand the ins and outs on his or her own and educating yourself takes
That being said, there are excellent MetaTrader 4 Forex brokers like Khwezi Trade which give traders access to the Forex markets with the use of great bonuses and promotions. Using these bonuses alongside leverage allows traders to access the markets with boosted funds, while their risk is not increased.
Brokers like Khwezi Trade provide traders with excellent bonuses, which can be used to great benefit with leverage, as outlined below.
|
Bonus |
Leverage |
Margin |
Deposit |
Buying Power |
Effective Leverage |
|
100:1 |
1% |
R 1,000 |
R 100,000 |
100:1 |
|
|
200:1 |
0.50% |
R 1,000 |
R 200,000 |
200:1 |
|
|
60% |
100:1 |
1% |
R 1,000 |
R 160,000 |
160:1 |
|
60% |
200:1 |
0.50% |
R 1,000 |
R 320,000 |
320:1 |
The pros and cons of cryptocurrency trading
The financial world as we know it could be reshaped, and the very survival of existing financial infrastructure could be called into question, thanks to cryptocurrencies. This exciting new financial instrument has numerous benefits, and risks, to traders today.
The benefits of trading cryptocurrencies include:
- High profit potential: Cryptocurrencies have unique characteristics, such as their tendency to rise and fall quickly in value. Supply and demand are the primary drivers of price in the cryptocurrency market. And these supply-demand dynamics can yield substantial profits.
- Secure technology: Cryptocurrencies aren’t linked to the actual digital coins. A decentralised data storage ledger, known as the blockchain, is responsible for keeping accounts of every transaction made on the network. There is no way to remove an entry from the blockchain after it’s been made.
- No intermediaries: Cryptocurrencies present a sound alternative to trading through financial intermediaries, including greater transparency and the benefits of a decentralised network due to the blockchain public ledger
And the disadvantages include:
- It takes time to learn: Getting your head around cryptocurrencies can be a challenge. Cryptocurrency (and the blockchain in particular) may not be second nature to those who are not digital natives.
- High volatility: While the price of a cryptocurrency might rise to dizzying heights (with accompanying rewards for investors), it can also fall to terrifyingly low levels just as quickly. In other words, if you want a steady income, this isn’t the best investment.
- Crypto is not regulated
- Cyber hackers take advantage
The above in a nutshell are the major differences between Forex and cryptocurrency trading.
