All kinds of products are traded on the financial market around the globe. The stock is one of the most popular and most secure investments there is. But who has no interest in a share or wants to deal with other financial products, has still many other possibilities for the investment. Many new traders on the market are focusing on Forex.
Currency trading takes place in the same marketplace, but works fundamentally differently. A new type of currency is the crypto currency, which can also be traded. The following article explains how trading with crypto currencies works and what differences there are when trading a stock.
The financial market as a global trading place
Many different products are traded on the stock exchange, with participants all over the world. The market is divided into different areas. One is the organized capital market, which includes the stock market as well as the capital and money market. The probably oldest and best-known financial product is the share, which appeared for the first time around the year 1200. It is also referred to as a security and certifies the holder of the share his shares in a company, project or product. With a share in something comes also different rights and obligations. Thus the profit participation for the shareholders, which is created by dividends, interest or by realized profits, is particularly important. But all types of investment have a certain risk, which must be analysed and evaluated beforehand.
The risk of a share
There are many ways and means to invest for the future or a profit increase. Buying a property or gold is also an investment, but it is far away from the financial market. When buying a share, the buyer assumes that the value will rise. Through increased profits which the company generates on the market or through other increases in value, the value of the company and its shares is heard on the capital market. Then the shareholder is free either to resell the share at a profit or to wait for a further increase in value. This is where the risk of the shareholders lies, because it can of course also be the case that the value of the share falls. Then the investment loses value, whereby the shareholder makes losses.
The market for currencies
Another way to generate profits on the financial market is the Forex market. You know Foreign Exchange when you are in a non-European country and exchange one currency for another. The basis for this exchange is the exchange rate, a value similar to a quota. The EUR/USD exchange rate is currently around 1.15. This means that if you want to exchange 100 euros, you will receive 115 US dollars in return. This is the principle at the exchange office at the airport or abroad. You don’t buy a currency on the financial market like you buy a share, but you bet on the price itself. The trader chooses different options, usually the so-called “call” and “put” options, which stand for rising or falling prices.
Trading in crypto currencies
First of all, it is good for explaining the differences of trading a crypto currency and a stock to know what a crypto currency is at all. The first word came up in 2009. Programmers created an algorithm that was the basis for a digital payment system with extensive security features as well as speed, also known as Bitcoin. There are now many different crypto currencies, much like there are different real currencies. The trade, respectively the investment in crypto currencies can proceed differently.
Because it is on the one hand possible to bet on the exchange rate as well as with Forex and thus generate profit. On the other hand one can buy similarly as with a share portions at crypto currencies. The value of a Bitcoin is currently around 5,600 euros. But since it is possible to acquire only one percent of a Bitcoin, you buy shares worth 56 euros. This makes you a shareholder in a crypto currency, just like shareholders are shareholders in a company. It is also possible to buy a whole or a share in a crypto currency and sell it profitably if the value rises.
The differences between an investment in a share and a crypto currency
So far it is clear how trading a stock works, how trading currencies works, what a crypto currency is and how trading it works. Now we’ll look at the differences. Probably the most fundamental differences are that a crypto currency is a kind of currency that is also fully digital. A share is a real document, which only works in the sense of an investment. Trading a share only works if you buy a share and hope for profits generated by the company.
Thus one either receives shares in the profit or one sells the share after a value increase profitably to other market participants. Crypto currencies, on the other hand, can be traded like normal currencies by betting on rising as well as falling prices and, as is the case with shares, can be used as a kind of investment. Another fundamental difference is the time frame in which profits are made. While it can take several weeks for a stock to pay for an investment, trading in crypto currencies can generate profits every minute. As with Forex, time frames of up to 15 seconds are possible. With the chance of fast profits with high yields of up to 80 percent, but of course certain risks also come with themselves.
Evaluate the opportunities and risks
In order to be able to trade on the financial market as purposefully and risk-free as possible, you need a good broker as well as comprehensive trading information. Professional websites such as the one here, have numerous analysis tools which are ideal helpers for successful trading. Nevertheless, it is essential to deal independently with all topics and areas of the financial market. The brokers appropriately manage extensive news pages on their websites with current events from politics, the financial world and social topics as well as tips and tricks from experienced traders for successful trading.