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While their general characteristics are similar, there are several key differences between forex trading, stock trading, and crypto trading. All three represent distinct markets that come with their own sets of risks and benefits.
If you're considering putting your charting skills to the test but don’t know if a trading platform like Prime XBT is the best fit, we offer genuine insight below.
We'll take a closer look at all three options, what they mean, and how they compare to one another, ultimately showing how you can make their unique pros and cons work in your favor. Ready? Let's start with the basics.
What's the Difference Between Stocks, Forex, and Crypto Trading?
Forex vs stocks vs crypto, let’s look more in detail.
Forex vs. Stocks vs. Crypto: The Basics
Before examining the differences between the three trading markets, we'll start by defining each.
Forex Market
Forex (short for foreign exchange) involves buying and selling currencies for profit. While the forex market contains over 100 currency pairs, the major pairs—EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, and AUD/USD - account for more than 80% of the total trading volume.
Cryptocurrency Market
Crypto trading is the buying and selling of any of the 1,000+ coins and tokens for profit. The most highly traded cryptocurrencies on the best crypto exchange platforms are large-cap coins like Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), and Dogecoin (DOGE).
Stock Market
Stock trading is the buying and selling of stocks in publicly traded companies. This is done over stock exchanges, the most popular being the NASDAQ and the New York Stock Exchange (NYSE).
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Now that we've defined the three markets, we can examine the major differences between them. Bear in mind that getting a grasp of these can help you decide what option might work best for you.
Market Volatility
Volatility describes the potential for the price movement of a financial asset. For example, if a stock's price fluctuates tremendously in a short period, it's said to be highly volatile. Although volatility dramatically increases the profit potential, it also substantially increases the risk.
The Forex market is said to be the least volatile, followed by the stock market, and lastly, crypto markets can be highly volatile.
Market Trading Hours
While the crypto and forex markets are open 24 hours, the stock market has set trading hours. NASDAQ and NYSE, for instance, are open from 9:30 AM to 4:00 PM EST. Forex and crypto are better options if you plan on trading after work.
If you go for weekend trading, crypto could be the best choice for you as forex can suffer from low liquidity and poor spreads over the weekend, if available.
Regulation
These three markets are also subject to different degrees of regulation. While the stock market is heavily regulated, most foreign currency trading is done through offshore and online brokers that aren't subject to US or Canadian regulations.
While this may be concerning for some, the best forex brokers are usually reliable and trustworthy. On the other hand, Crypto is largely unregulated and, of the three, is the most susceptible to pump-and-dump schemes.
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Market Size
Forex is by far the largest market, totaling over $6.6 trillion in daily trading volume. To get a sense of its scale, consider that stocks and crypto usually do roughly $50 billion daily.
Blue-chip stocks and large-cap cryptocurrencies have more than sufficient volume for short-term or intraday trading. However, highly speculative plays like small-cap stocks and coins can suffer from liquidity issues which is something to keep in mind before diving in.
Market Risk
With higher risk come higher rewards. It's a truism that holds sway with all three trading options given here. If you don't mind investing in highly speculative and volatile assets in search of a quick ten-bagger, the crypto market is the way to go.
If you're risk averse and prefer more predictable markets, forex trading is the better choice for you. For something in-between, the stock market is generally considered a medium-low risk. Still, your outcomes will largely depend on what stocks you buy. Finally, the stock and crypto markets are much better suited for long-term investing than foreign currencies.
Margin Rates
Leverage, or margin trading, lets you trade using borrowed funds. In the US, stock leverage is typically capped at 2:1, meaning you can borrow up to twice your cash. By comparison, most forex brokers offer leverage from 20:1 up to 50:1.
Leverage is also heavily used in crypto markets and varies from one exchange to the next. Still, if you're interested in margin trading, forex and crypto markets certainly look like the best options.
Forex vs. Stocks vs. Crypto: The Landscape of Stocks, Crypto, and Forex Trading
Whether it be stocks, crypto, or forex, all asset classes are affected by macroeconomic conditions, global politics, investor sentiment, and changes in central banking policies. Yes, all of those you do not have a crystal ball for. However, some trends can be reasonably predictable with expertise.
For example, when the Federal Reserve raises interest rates, it usually causes the US dollar to appreciate. Conversely, when interest rates rise, stocks tend to drop in anticipation of lower future earnings.
On the other hand, the crypto market is less predictable as it's sometimes unclear how institutional investors will react to rate hikes and other economic data. However, there are some general rules investors can follow.
Typically, when Bitcoin increases in price, altcoins undergo rapid price increases. When Bitcoin and other large-cap coins experience a sell-off, altcoins get hit hard. Additionally, in times of economic expansion, money flows into the crypto market as speculators hunt for high-risk/high-reward investments.
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Forex vs. Stocks vs. Crypto: Pros and Cons of Forex Trading
Pros:
- High liquidity ($6.6 trillion in daily volume)
- Lower risk (compared to stocks and crypto)
- High leverage available (up to 50:1)
- Low fees
- Great for automated trading
- Low minimum investment
- Market open 24 hours Monday - Friday
- Great for day trading
Cons:
- Poor spreads on the weekend
- Not suited for long-term investing
- Light regulatory protection
Forex vs. Stocks vs. Crypto: How Can I Get Started Trading in the Forex Market?
The easiest way to start trading in the forex market is by opening a trading account with a reputable broker. A good place to start is our review of XTB, as one of the best platforms you can go for. From there, fund your account and decide which currency pairs to trade.
What Is the Difference Between Forex and Cryptocurrencies?
- Number of Trading Instruments: Most forex traders focus on five to eight major currency pairs. By comparison, crypto traders have access to over 100 high-liquidity coins.
- Trading Hours: Both forex and crypto markets are open 24 hours, Monday to Friday. However, the crypto market is also open for trading during the weekend. While some forex brokers provide weekend trading, liquidity is usually low, and the spreads are high.
- Market Volatility: As mentioned above, crypto markets display significantly higher volatility than forex.
- Decentralized vs. Centralized: Cryptocurrencies are decentralized assets that aren't controlled by governments. By contrast, fiat currency is issued by central banks and is heavily affected by global events and monetary policy.
- Inflationary vs. Deflationary: Many popular cryptocurrencies—like Bitcoin or Ethereum—have a deflationary or static supply. Fiat currencies have an inflationary supply.
Forex vs. Stocks vs. Crypto: Is Forex Safer Than Cryptocurrencies?
Yes, forex is safer than cryptocurrencies. Not only is the market less volatile, but you won't have to deal with pump-and-dumps or other scams when trading forex.
Forex vs. Stocks vs. Crypto: How To Get Started in Forex Trading?
The easiest way to start trading is by opening an account at one of the best Forex mobile trading platforms and picking a handful of currency pairs to follow. You should also familiarize yourself with and track the major economic indicators that drive the forex market: inflation rates, interest rate changes, GDP, and the PPI.
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Forex vs. Stocks vs. Crypto: Pros and Cons of Crypto Trading
Pros:
- Low starting capital needed (start with just $10)
- Lowest fees
- Highly volatile—potential for massive gains
- High margin available (up to 100x)
- 24/7 trading (weekends included)
- Suitable for both short-term and long-term investing
Cons:
- Profits are subject to capital gains tax
- Highly volatile means potential for massive losses too
- The market is full of pump-and-dump schemes
How Can I Trade Crypto Right Now?
The easiest way to trade crypto right now is by opening an account with a reputable exchange like Prime XBT or Public.com. Once approved, you can link a debit/credit card and fund your account. Read our Public.com review for more details.
What Is the Difference Between Trading on Stock and Forex Markets?
The major difference between trading stocks and forex markets is volatility. While forex pairs tend to stay relatively stable, stocks—especially highly speculative ones—can be highly volatile. That said, stocks have a much higher potential for life-changing gains, and if you get into the right company early, it could set you up for retirement.
Finally, stock market trading is limited to business hours, while the forex market can be done 24 hours a day, Monday to Friday.
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Is the Crypto Market Risky for Day Traders?
Yes, the crypto market is considered high-risk for day traders. This is especially true with low-cap altcoins, as intraday price fluctuations of over 30% are not uncommon.
Forex vs. Stocks vs. Crypto: Pros and Cons of Stock Trading
Pros:
- Lower risk than crypto trading
- Great for short, medium, and long-term investing
- You can access the stock market from your online banking apps
- High liquidity
- Highly regulated
- Many blue-chip stocks pay dividends
- Great for automated trading bots
Cons:
- Only open Mon-Fri (9:30 AM - 4:30 PM EST)
- Max leverage of 2:1
- Trading fees can be higher than forex or crypto
- Not as much volatility as forex or crypto
What Is One Way I Can Trade Stocks Right Now?
The easiest way to trade stocks right now is through an online broker. Instead of searching for the best Forex desktop trading platforms, you can find platforms through banks and their online banking software.
This is convenient and lets you transfer funds between your online banking and trading accounts with ease. However, not all banks offer quality trading software and many can’t compare with Forex desktop apps.
What Is the Difference Between Trading Stocks and Cryptocurrencies?
The significant difference between trading stocks and cryptocurrencies is volatility. In the crypto market, it's not uncommon for large-cap coins (like Bitcoin and Ethereum) to fluctuate by 15% or more in one day. By contrast, blue chip stocks may only fluctuate by a few percentage points on average.
While this makes the stock market less risky, it also reduces potential profit. Additionally, the stock market is significantly more regulated than the crypto market, reducing the chances of losing money to scams and pump-and-dumps.
Does the Stock Market Come With the Lowest Risk?
The stock market is considered one of the least risky investments, especially if you stick to blue chip stocks. Buying physical gold is also a safe investment, especially in the long term.
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Forex vs. Stocks vs. Crypto Market: FAQs
Let’s move on and answer some of the common questions you might be asking about forex, stocks, and crypto below.
Can a Forex Broker Steal Your Money?
Yes, a forex broker can steal your money, although such an event is rare and only happens when using shady brokers. If you're concerned about losing money, only open forex accounts with reputable brokers. We strongly recommend you read customers’ opinions online and a good place to start can be our review of Saxo.
Which Forex Broker Is the Best?
Prime XBT is arguably the best forex broker at the moment. With clients in 150 countries and 24/7 customer service, the platform offers top-tier liquidity and a wide range of trading tools. You can access over 100 trading assets and numerous trading tools. You can trade cryptocurrency, commodities, and stocks. The site uses Amazon AWS as its trading software.
Are Forex Brokers Worth It?
Yes, forex brokers are worth it. They provide access to real-time quotes and an array of trading tools and indicators, as the only practical way for retail investors to access the forex markets.
What Should I Look for When Choosing a Broker?
When choosing a broker, consider the following criteria:
- Trading Pairs Offered: Always check which currency pairs a broker offers before signing up. This is especially important if you're interested in trading minor or exotic pairs.
- Spread & Trading Fees: Spreads and trading fees can vary between brokers, so always compare a few options before signing up. Additionally, look out for monthly account fees.
- Trading Software: Trading platforms are different and you may prefer one over the rest. While MetaTrader4 is considered the industry standard, some brokers use proprietary software as well.
- Reputation: Like stocks or crypto trading platforms, some forex brokers are more reputable than others. Before depositing money into a forex account, ensure you’re with the best forex trading platform you can find.
Can Forex Trading Make Me Rich?
Yes, forex trading can make you rich. However, most forex traders lose money, and it does take time and practice to become proficient in the art and science of trading.
How Do I Trade Forex With $100?
The easiest way to trade forex with $100 is by opening an account at a popular platform and using a beginner trading strategy like Simple Moving Average (SMA) crosses, MACD crosses, or momentum trading. Go with brokers offering detailed trading guides for a new forex trader.
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How Does Forex Trading Compare to Stock Trading?
Day trading, forex, and stock trading follow the same mechanics. That being said, forex comes with lower trading fees, and if you stick to the eight major pairs, volatility can be much lower compared to the stock market.
What's Better for New Traders? Crypto or Forex?
Forex is better for new traders because of the lower volatility and lower risks in general. However, both markets are beginner-friendly and you will need to proceed with caution with both as well.
Is Forex Better Than Stocks?
Yes, forex is better than stocks for high-frequency trading due to the low trading fees and longer market hours. However, stocks are considered a better long-term investment, and because the volatility is higher, there's a greater potential for quick gains.
What Is Better, Crypto or Stocks?
For trading, crypto is better than stocks. Crypto exchanges have some of the lowest trading fees, and the volatility can make high-frequency trading very profitable.
Is Crypto Riskier Than Forex?
Yes, crypto is riskier than forex too. Although trading either market can be risky, the crypto market is prone to quick price movements that can instantly wipe out gains or trigger margin calls.
Which Is Easier To Trade, Forex vs. Stocks vs. Crypto? Final Word
Short-term investors wanting to minimize risks and rely on technical indicators to identify entry/exit points should trade the forex markets. On the other hand, if you welcome high volatility and a higher risk/reward profile, trading cryptocurrencies at top platforms like Prime XBT is the best option.
For something in the middle, the stock market is a good fit. However, trading fees are typically higher with stocks than forex and crypto unless you're trading with large sums of money. Whatever you choose, keep in mind that trading is a high-risk activity and, as the old saying goes, don't trade with money you can't afford to lose.
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