Nowadays, cryptocurrencies such as Bitcoin and its lesser-known siblings Ethereum and Ripple are everything the foreign exchange market is talking about. Despite their huge volatility and recent value plunge, they still seem to be the most popular stock of the past year. However, traditional currencies will always be the better choice. And heres why:About Traditional CurrencyAccording to Investopedia
, there are eight major currencies on display on the foreign exchange market, and they are traded in pairs. These are represented by the U.S. Dollar (USD), the British Pound (GBP), the European Euro (EUR), the Canadian Dollar (CAD), the Australian Dollar (AUD), the New Zealand Dollar (NZD), the Japanese Yen (JPY), and the Swiss Franc (CHF).
Naturally, EUR/USD is the predominant choice for most traders because it is formed by the two most widely known currencies in the modern world. Thus, the market for it moves multiple times a day, and especially when London and New York are open for business. There is a lot of liquidity for this coupling, and plenty of stability as well.
If you want to try a few other ones for size, opening a Forex practice account
is a good idea because you can test out the market in real-time conditions without any consequences on your capital. Venturing off the beaten path and trading other pairs is a good strategy if you want to make a profit, provided you do your research properly beforehand.How to Analyze the Market
Knowing what odds your trade has of being successful is one of the best ways to ensure you receive some gains once you ride it out to completion. Unfortunately, there is no failsafe way of doing that, by performing adequate fundamental and technical analysis
of market data you will gain a better understanding of what is going on.
On the one hand, fundamental analysis
involves perceiving the market through the fundamental economic factors which influence it. These include the equities, expenses, and equities that a particular stock has, as well as national aspects such as interest rate for a certain currency and gross domestic product values for the current year.
On the other hand, technical analysis
focuses on the historical context surrounding a stock. By using evolution charts, interest volume rates over time and other knowledge regarding a forex pairing, you can determine what the most likely outcome of a trade will be depending on present circumstances.
A potential third option is represented by sentiment analysis
, which is seldom used by rookie traders due to its high degree of subjectivity. It involves getting a feel of the market through your own knowledge of it, which will prompt you to establish what direction others are committed to. However, this only works if youve been in the game for quite some time already.
Considering the liquidity and leverage amount of a certain trade is also something that you need to master. All these combined are essential for risk management, which is something all seasoned players on the forex market learn sooner or later. Even big names in the industry, such as Solomon Brothers star trader Bill Lipschutz, had to own their mistakes in this field.Final Thoughts
Even though the forex market is currently taken over by Bitcoin and its other fellow cryptos, traditional currencies such as the U.S. dollar, the euro, the pound and so on will never become obsolete, or at least not in the near future. Thus, if you are looking for a stable, liquid alternative to make good profits in the trade, they are the best choice.