If you are just getting started with online trading, you are likely wondering what specifically you should trade. While an experienced trader could put his money in trading currencies, stocks and cryptocurrencies, a novice trader might be best served taking on one at a time. This way, he/she can learn and perfect the art of online trading without risking too much of his starting capital. Though social trading platforms like eToro have simplified trading even for the most inexperienced, it still makes sense to go in cautiously and to choose only one of these three. So, which one should you trade? Before answering this question, let’s take a look at each one of them.
Currencies are traded in lots of different sizes in a 24-hour market that is only closed between Friday evening and Sunday evening. This micro lot constitutes 1000 currency units. This means that if you have an account that is funded in US Dollar, your micro lot will be represented by $1000 of the dollar, your base currency. A mini lot on the other hand represents 10,000 units of a base currency while a standard lot represents 100,000 units.
An important thing to note about currency trading is that all currency trading happens in pairs. This is different from, for example, the stock market where it is possible to sell or buy just one stock. When trading currencies, you are required to sell one currency and buy another. The first listed currency of a currency pair is called the base currency, and the second currency is called the quote currency.
Additionally, the price of currency is, almost always represented with up to four decimal points, allowing investors to make money even with the slightest change in price. People new to currency trading often trade in micro lots as they learn the intricacies of the market.
Currency prices are affected by a lot of economic factors that include monetary policies of central banks, inflation rate and political and economic conditions.
Stock Market Trading
Unlike currencies trading, stock market trading is not a 24-hour market. Here in the Philippines, stock market trading is limited on weekdays from 9am to 3:30 pm.
The stock market offers opportunity to investors to increase their income without the high risk of entering into their own businesses with high overheads costs. On the other hand, selling of stocks help the companies themselves expand exponentially by providing them the capital they need to deploy in various needs.
When you purchase a company’s shares, it is generally associated with the increased in the company’s earnings and worth over the years. Trading on the stock or equity markets can be a win-win for both investor and owner.
Cryptocurrencies are digital assets designed to work as a medium of exchange that uses cryptography to secure its transactions, to control the creation of additional units, and to verify the transfer of assets.
The rise of the blockchain technology gave rise to these types of digital assets. Bitcoin and Ethereum have become the top two cryptocurrencies in terms of market capitalization. They are being traded against other types of cryptocurrencies called “altcoins” or alternative coins.
Just like currencies trading, cryptocurrency trading is also a 24-hour market. Since blockchain technology is just new, cryptocurrency trading is more of a speculative.
Which of the Three Should You Trade?
As with any kind of investing, educate yourself first before you trade your hard-earned money. In my opinion, forex trading is the riskiest of these three. That’s why most forex brokers provide demo accounts to interested novice traders to begin with where you can trade without spending any money. Stock market is mostly for the long-term in order to maximize profits without the hassle of monitoring its prices on a daily basis while cryptocurrency is more of a speculative investment that responds directly to news on government regulation and market adoption.
Trade the one that you are mostly educated and comfortable to trade. Education is your best ally to develop a winning trading strategy.