The trading world has similarities between all the different sectors. Whether you trade stocks, futures, CFD’s – there are skills you learn that are not restricted to your chosen market.
We have over 15 years of experience in forex trading and have found a lot of similarities with cryptocurrency trading. If you are familiar with forex trading you may be surprised at what you can apply to crypto trading!
This isn’t just relating to the good things you can carry over though. There are similar dangers and pitfalls.
If you apply what you know from your forex trading, you could reduce a lot of the risks that come with entering into a new trading market.
From our research and exploration of the crypto trading space, we have found some interesting strategies. Our own testing of multiple strategies has shown that a lot of techniques used in forex can be applied to cryptocurrency trading.
Price action is one broad strategy that is applied in crypto trading. There are differences, so you can’t just replicate your price action strategy over to cryptos.
But the concept is very effective with crypto trading, especially when traders find a way to supplement the strategy.
Indicators can also be used on cryptos – though there is a process of trial and error for what does work. We have found that, although a lot of indicators and strategies can be transferred over, they are not as effective.
Cryptocurrency is more volatile to trade and more sensitive to things like news. That means more risk, which has to be accounted for in your strategy.
This is how we get very similar strategies that are not quite the same. That addition of a bit more risk brings us to our next similarity.
There are more risks trading on the crypto market versus trading on the forex market
But you will be surprised to find out that cryptos are not as dangerous as many people think.
If you go back two years or even just one, the dangers of crypto trading were much more apparent. Fees were largely confusing and expensive, cryptos were only heading in one direction, up, which made brokers wary of entering the crypto space.
Those dangers have been reduced significantly. Fortunately, they are now manageable with enough research and knowledge of the crypto trading market.
It is very similar to the forex market in that sense. With a lot of forex brokers now offering crypto trading, we are moving toward a healthier balance of competition between trading platforms.
News is something you also have to navigate with cryptos, just as forex. Price reacts to big news events.
The additional danger that you don’t see in forex is that price is more sensitive to news.
What this means is that a cryptotrader needs to be slightly more aware of potential business announcements or economic events.
If you don’t, your trades will be negatively affected by news.
Crypto trading is smaller than forex trading but the news released on both have a big impact globally. This is why crypto trading is more sensitive and volatile. It is a smaller market so price is impacted more by news.
That means more volatility in crypto trading.
This will excite some of you and make others quite skeptical. Either reaction is a good reaction – if you approach crypto trading correctly.
More volatility means there is more risk, but also more money to be made. When forex trading first came to the public, it had a similar volatility to what crypto trading has today.
It is possible to trade in it – we have experience with trading forex in the early days – so don’t be intimidated by cryptos because of their volatility.
Demo trading exists with crypto trading just as it does for forex trading. You can experiment and test out some ideas without risking your capital.
One danger that is the same in both markets is copy trading. In the crypto market it is just as prevalent as it is in forex trading.
We never recommend copy trading because it doesn’t enable you to become an independent trader. Relying on others to make trading decisions for you is going to harm you in the long run.
We go a bit more in depth about copy trading in this article.
If you are serious about trading, you need to be serious in applying yourself. You will not develop core skills that you need to have in order to be a profitable trader.
One of those skills is pivotal in your success: your trading psychology.
Your mindset in forex trading and crypto trading is going to follow very similar paths.
Having the mental strength to cope with losing trades, not chasing trades, preventing emotional trading – these are all psychological risks that you will come up against in both types of trading.
Fortunately, if you are an experienced trader you can apply what you already know about trading psychology.
We actually recommend having a stronger trading psychology with cryptos vs. forex. This is because the volatility of the market is greater.
A lot of worry around crypto trading is losing money. That is a misplaced worry though.
If you allow a negative mindset to dictate your trading, you could lose more with crypto trading. We are in the process of creating our most rigorous and thorough trading psychology course for this exact reason.
Your mindset should be your focus. If you have a strong trading mindset you can be confident in trading cryptos. The entire process is very similar to forex – there are just less pairs to trade.
Having a strong mindset is going to help you prevent greed which is crypto trading’s worst enemy at this point.
The potential to earn more money is something that risky and greedy traders will gravitate towards. By understanding your own trading psychology you won’t succumb to these shortcomings.
You can trade the space in a smarter way. That will push you towards profitability.
All of this is the same in forex trading. The only difference is that you have the potential to cut your crypto trading career short more easily than your forex career.
So don’t be intimidated by crypto trading! It is an interesting space to experiment in. Trading can be monotonous – this will challenge your trading skills and, if done right, will make you a much better trader.