You who cultivate an investment certainly no stranger to the term trading, be it forex trading or stock trading. but recently a bitcoin trading trend. although same as trading but there is little difference in how it works. let’s discuss further the similarities and differences of forex, stock and bitcoin trading.
Most traders get to know forex trading or stocks rather than bitcoin trading. Because Bitcoin itself just appeared in the year 2009. Well, before dissecting the difference of forex trading and bitcoin trading, it would be nice we know in advance what is forex trading? stock trading and trading Bitcoin ?.
Understanding Bitcoin Trading and Bitcoin History
Bitcoin is actually a digital payment tool that is more like paypal, webmoney or other digital currency than the currency recognized by a country. but over time as more and more need or deliberately invest in this currency then the value of bitcoin is increasing rapidly. because of this rapid rise into a tradable opportunity as well as stocks.
Bitcoin itself is an open source virtual currency (cryptocurrency) developed in 2009 by someone under the pseudonym of Satoshi Nakamoto. This currency is like Euro or Dollar, but it is only available in the digital world. Bitcoin is stored into the Bitcoin wallet. This is the wallet that will be used to send and receive bitcoins, with varying fees or shipping charges.
The new bitcoin is created by a process called “mining”. Miners use sophisticated computers to decipher the complex mathematics to discover the new block of Bitcoin, as a reward the inventor will be rewarded with a number of bitcoins. Prize per 1 block found initially there are 50 BTC, now 25 BTC / block. The amount of Bitcoin has been determined since it was created, ie as many as 21 million BTC. This restriction is in place to prevent inflation.
What are the advantages of Bitcoin?
At first Bitcoin emerged as a means of payment to cover the weaknesses of existing electric payment instruments, where bitcoin offers advantages such as:
- Transaction costs are very small, almost non-existent
- Faster delivery process
- Anonymous (no owner identity required)
- High security
What are the disadvantages of bitcoin?
- There is no guarantee
- Not recognized by most countries
- Fictitious, fundamentally unclear
- Prone to be used as money laundering
Thus a brief description of the history of Bitcoin, its advantages and disadvantages. So what distinguishes forex trading, stocks and Bitcoin? Here’s the review.
Stock Trading vs. Bitcoin Trading
The Stock Exchange defines a stock as a securities traded on the stock market where the shareholder will have the opportunity to earn dividends and capital gains (the profit we earn when selling shares is higher than the purchase price). The acquisition of capital gains is what usually makes people think that buying and selling Bitcoin as well as stocks because they benefit from the difference in selling price with the price when they buy Bitcoin.
Price movements in stocks one of them is influenced by the performance of companies such as increase / decrease in profits and sales, dividends, or news spread in the public about the state of the company. In the world of Bitcoin, unit prices are also strongly influenced by the same thing: increasing and decreasing demand, as well as press circulating in the community. Still remember how bad news about fatal mistakes in the management of Mt. Gox causes a drop in Bitcoin prices? Compare that with stock prices falling by 73% throughout 2014 because the company can not serve its debt obligations. You can see similarities in both cases.
Forex Trading vs. Bitcoin Trading
Forex (Foreign Exchange) or Foreign Currency is a type of transaction that trades a country’s currency against another country’s currency in order to gain profit from different currency values. Equality of stock and Bitcoin, can also be found in the world of Forex where traders take advantage of the opportunity to buy foreign currency when the price is still cheap, and resold at higher prices.
The price movements of those three things are influenced by supply-demand, and people can predict the direction of price movements by technical analysis methods (looking at charts and past price movements) or fundamental (looking at intrinsic value or company circumstances). Using any analytical method, no prediction can be 100% accurate because stock prices, Forex, and Bitcoin may change at any time when unexpected things happen. For example in the Forex world: when 9/11 occurs, the USD rate falls because everyone estimates that the event will affect the weakening of the USD. This incident caused many market players to sell USD so that finally the USD rate really dropped dramatically.
With an average daily volume of US $ 2 trillion, the Forex Market is 46 times larger than all stock market combined and is therefore the most liquid market in the world. Compared to Forex, the Bitcoin market is still a small market, so the Bitcoin price tends to change (5-7 times more volatile than Forex) when a party buys or sells Bitcoin in large quantities.
Bitcoin VS Stocks and Forex: Which is the Best Trading Facility?
Forex, stocks and Bitcoin have their own advantages and disadvantages. The choice of the best means of trading can only be determined by each individual with a careful calculation. Keep in mind that trading Bitcoin tends to be more risky because the price is more volatile than the other two markets, but Bitcoin’s potential is much bigger than both.
Bitcoin is more like a stock compared to Forex in terms of assets, but unlike stocks or Forex, investors in the world of Bitcoin need not rely on third parties or brokers. You do not have to fear that someone will take your money away as long as you quickly pull your Bitcoin into your personal wallet. In addition to investing, Bitcoin can also be used for other things like faster remittance processes with very low transaction costs, safer hoarding of wealth, and more efficient modern payment instruments.
Differences In Forex Trading Process and Bitcoin Trading
Usually people know the term ‘trading’ because it is introduced forex, then if you were previously a forex trader may feel confusion when opening a bitcoin trading site. because the way forex trading is not the same as the way bitcoin trading. if from forex we know 2 terms: Long and Short. Long is targeting price up to get profit and Short is targeting the price down to get profit.
While in Bitcoin trading it is much more like buying and selling goods online that is BUY and SELL. BUY means actually buying goods in the form of Bitcoin and SELL means actually sell goods in the form of Bitcoin. So that the profit is simple only the selling price minus the purchase price. So there is no term Margin Call and PIP in Bitcoin trading, there is a sale of profit or loss. so it’s more like stock trading is not it?
Another difference is, bitcoin prices tend to be more volatile without definite reason than forex. Good news related to bitcoin does not necessarily make bitcoin prices go up. Precisely these good news will only make the bitcoin prices further degenerate, even also no effect at all. In other words, the rise and fall of bitcoin can not be ascertained by indication of circulating information only. a lot of factors can allow ups and downs of bitcoin prices, not even at all. The value of bitcoin is out of control, it all depends on the trader, because they are the ones who play the price at will.
This is different from forex trading or stock trading where the condition of forex market world depends on all information in circulation, information in the form of economy, politics, war, disaster, and so forth. Especially for countries with advanced and strong economies, there is little sensitive information, then the price of the currency can move up and down. This is what traders see as an opportunity and opportunity to trade. So simply, the purpose of forex trading is to gain profit from the rise and fall of currency exchange rates.
Another difference is that Bitcoin is developed with the idealism that a good currency is not controlled by the government or central bank. The government is always believed to be dominated by corrupt people and only works for personal gain, so financial decisions always take sides with the conglomerate. Bottom line Bitcoin does not allow the government and central bank to organize it.
Of course this is not owned by forex. As mentioned earlier, that forex trading is very sensitive to the problems that arise, even new issues alone have greatly affected the rise and fall in prices. Especially concerning the decision of the government and central bank.
Then what about the risks of all three?
Both forex trading, stock trading and bitcoin trading have the same risk of loss and profit. You could lose millions on the spot if you take the wrong opportunity or even miscalculate when you set the price. The more so in bitcoin trading because it is difficult to analyze.
If in forex trading can still take the opportunity to take profits even though the currency continues to fall. In contrast to bitcoin, this will create a hesitation among traders who hold cash and traders who just bought bitcoin. However, most bitcoin traders will take the opportunity to BUY bitcoin action in situations like this, while hoping someday bitcoin will rise as well as on stock.
No matter both of these things you make as an investment field or to just plain trading, which must be good forex trading and bitcoin is an investment business that has a very high risk. So consider wisely not to make a wrong decision.
Thus information about the Differences of Forex Trading, Stock Trading and Bitcoin Trading. Hopefully useful for those of you who menguti the world of investment, especially in the field of trading.