Cryptocurrency adoption continues to grow, especially more as of late, as the recent banking crisis has highlighted the challenges of the traditional financial system. Despite all the doom and gloom that came in the first quarter from the Fed’s inflation-fighting rate hike campaign, banking turmoil and growing concerns that the economy is headed for a recession, Bitcoin
has risen significantly, up to 80% year to date. Many traders seem to believe that the dollar will gradually lose some of its preferred reserve currency status, with crypto being one of the beneficiaries.
Newcomers may join the crypto market for various activities, such as staking, yield farming, play-to-earn gaming and more, but trading still plays a central role.
Despite the fact that digital assets are a relatively new asset class for private investors to trade and invest in, the crypto market is very similar to traditional trading in some key aspects.
Those who have previously traded other instruments, especially forex pairs, can easily transfer their skills and experience to crypto trading while taking into account the unique characteristics of this market.
In particular, because both markets are highly technical, liquid and volatile, strategies used to day trade forex can frequently be applied to crypto.
There are several aspects of forex trading that can be similarly applied to crypto trading:
Technical analysis — analyzing historical price data to identify patterns and trends is an important skill that can be used in crypto trading. Forex traders read charts and use this information to understand market trends. From candlestick charts to technical analysis indicators such as moving averages, Bollinger Bands, the relative strength index (RSI) and a stochastic oscillator, this experience is easily transferable to crypto trading. The price action of cryptocurrencies fluctuates according to the same supply-and-demand principles as forex pairs, although digital assets are often more volatile.
Risk management — forex traders are well-versed in risk management strategies, which are especially relevant to cryptocurrency trading. The crypto market is volatile and unpredictable, requiring traders to effectively manage their risk in order to avoid significant losses. Forex traders are familiar with concepts such as stop-loss orders and position-sizing, which can be applied to crypto trading to minimize risk.
Continuous markets — forex traders are often attracted to the OTC forex markets because they offer a wider range of trading times than many listed markets, and the continuous active trading hours can make it easier to get into and out of positions. While forex is attractive because it trades 24 hours a day excluding weekends, crypto trades nonstop, 24 hours a day, 365 days a year.
Navigating trading platforms — forex traders are acquainted with navigating various platforms and using different trading tools. This experience can be useful in cryptocurrency trading, where traders have to switch between different exchanges, trading platforms and tools. Those with prior experience in traditional trading would have familiar experience while exploring crypto trading tools, including the interface, charts and indicators.