The Difference Investing in Stocks, Forex and Crypto

Recently, people are increasingly presented with many investment options. In addition to investing, now many people have started trading as another alternative to manage and develop their finances.

The choice of trading instruments also varies, ranging from stocks, foreign exchange or forex, to what is currently on the rise is crypto assets. The question is what is the difference between these investment instruments? What are the advantages and disadvantages?

"Stocks, forex and crypto assets have different characteristics and ways of working. Traders can customize the instrument according to their personality, capital, risk appetite and goals. At ICDX itself, we provide derivative products for gold, oil raw materials, and forex (GOFX)," said ICDX Business Development Manager, Dedi Prasetyo in his official statement, Monday (12/27/2021).

For most of those who have been in the trading world for a long time, they might recommend stocks, because these assets are classified as traditional assets and many stock investors are included in the ranks of the richest people in the world.

However, for traders who like challenges and want to reap profits in a shorter period of time, they tend to recommend forex or crypto assets that have high volatility.

Stocks

When trading stocks, traders buy or sell shares of a company with the aim of making a profit. It is not uncommon for stock and securities transactions to be used to ensure fair prices, because the capital market is a controlled environment.

The majority of stock investors buy stocks to be held for a long time and earn big profits. However, it is not uncommon for traders to use stocks for short-term profits.

For traders, one of the drawbacks of stock trading is that there are exchange trading hours, so trading time is more limited than forex and crypto assets. In addition, the stock market moves relatively slowly in terms of volatility compared to forex and crypto assets.

The value of a stock is influenced by macro and micro economic factors. For example, a country's economic growth is stagnant and tends to decline. This will affect the value of the shares of companies based in that country to fall. Meanwhile, stock liquidity depends on the popularity of the stock among investors and the capital invested in the stock. This is why blue-chip stocks are often more liquid than other stocks.

What about forex and crypto?

Forex

Although stocks have been around for longer, the forex market is in fact the most liquid market with a daily transaction volume of US$ 6.6 trillion according to the Bank for International Settlements (BIS) in 2019. Forex stands for foreign exchange or foreign exchange trading. In the forex market, traders will trade a pair of currencies (forex pairs). For example, AUD/USD, USD/JPY, and so on.

Usually, the major currency pairs are the most liquid markets. For traders, there are several advantages of the forex market that can maximize their profit opportunities, including the facility of leverage and overlapping trading sessions.

The forex market is open 24 hours a day, 5 days a week, but these trading hours are divided into several trading sessions around the world. The four main trading sessions are New York, London, Sydney and Tokyo. When two sessions are open at the same hour, trading activity will be more active and the market will be more liquid.

Crypto Asset

These assets are blockchain-based digital currencies that can be created by companies, individuals, or even banks. The main purpose of crypto assets is to decentralize the financial system by eliminating intermediaries. In Indonesia, crypto assets are not a substitute for state currency (fiat), and regulations related to trading crypto assets are still different in each country. So, crypto assets are still more widely used as a means of managing capital than tools payment.

Like stocks, there are two types of crypto asset users; investors who buy cryptocurrencies and hold their holdings for long periods, and traders who actively trade cryptocurrencies to profit from market volatility. Compared to forex and stocks, the volatility of the crypto market is much higher.

However, only a few cryptocurrencies have high liquidity, generally the very popular ones like Bitcoin and Ethereum. In addition, the crypto market is open all the time. Sentiment towards the crypto asset market tends to focus on microeconomic factors. For example, Elon Musk's tweet some time ago which then pushed the price of Bitcoin to the top. But when the Tesla founder's tweet reversed course, Bitcoin's price plummeted, dragging on even other coins.

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