Stocks vs Forex vs Crypto: Which Should You Trade?

Tons of new traders ask us the same question over and over again:

“What is the best asset class to trade? What is the best instrument? Stocks vs Forex vs Crypto?”

There are pros and cons to trading each, but more importantly, there are key differences in the actual market structure you need to be aware of.

Let’s dive right into some of the key differences between each of these asset classes.

Stocks vs Forex vs Cryptocurrency Market Hours

The Crypto markets trade 24/7. They are a continuous market that allows traders to take advantage of the added freedom around-the-clock market brings. Obviously, this does bring some downside risk of the market sliding down while you are asleep, but automatic stop losses and take profit orders will help.

The Forex markets trade 24/5 on most of the major pairings. Markets typically open on Sunday and close on Friday. The times in which markets open are based on the country and currency the pair you are trading is located in, but typically they are all open 24 hours a day, 5 days a week.

The stock market is much different than the crypto and forex markets, trading 5 days a week from 9:30am to 4:00pm every day. Pre-market starts around 7am as well, but the main market action is from 9:30am until noon, which is the window we focus on.

Pick the instrument that suits your lifestyle and timezone the best. If you live in Hawaii, the market opens at 3:30 AM for you, so maybe you’d prefer to do crypto or forex. If you work at night, maybe day trading the stock market is the choice for you.

Kunal Desai’s Thoughts

After navigating the markets for over two decades, Kunal will further elaborate on what you need to know about each instrument, and how to find the best instrument for you:

Movement

A lot of people do think the markets trade similarly to each other, and while to an extent that may be true, there are some differences you need to be aware of.

The crypto market is very volatile. There can be sudden drops and sharp price hikes that can affect you. It is an ‘unregulated market’ that is purely regulated by supply and demand with a limited number of market makers being involved (unlike stocks). Just know when trading the crypto markets, you have to be prepared for anything. Trading smaller alt-coins is like the wild wild west, you never know what will happen in the next second. Always be prepared to stop out or take profit quickly.

The Forex market trades much differently than the crypto and stock market in the sense that it is the most manipulated. A lot of traders ‘swing trade’ forex more than day trade due to this fact. Very few successful retail forex day traders exist. Day trading forex is very difficult, as you are up against some of the richest and smartest traders in the world with automated strategies.

Forex is notorious for having a lot of fake-outs like these:

Finally, the stock market due to its more limited trading hours obviously moves differently than the forex and crypto markets. It is a very volatile market, but as stated before, there are certain times of the day when the movement and activity are increased. During the ‘opening session’ which is from 9:30am until noon, volatility in the markets increases and a lot of traders are able to day trade these moves for quick money. During lunchtime from 11:00/11:30AM until roughly 2:00pm-2:30pm, ranges condense and activity slows. Finally, during ‘power hour’ following lunchtime into the close, stocks tend to pick up in action and volume.

The Ratio of Retail to Institutions

This category is something that not a lot of people talk about, but it is very important to know. Let’s dive right into it.

The crypto market has the highest number of retail traders and investors out of these three asset classes at the moment. Yes, this may change and is starting to change as time goes on, but for the time being, just know that the crypto market is dominated by retail traders. That means there are a lot of small orders going through and a lot more volatility that is generated as a result. There are not too many institutions positioning themselves in the smaller alt-coins, but mainly the larger coins like Bitcoin and Ethereum. The good news, this means that the technical analysis is much cleaner, and it is easy to get a read on the emotions of the market.

The forex market by far has the highest number of institutional traders and investors, which makes it one of the most difficult markets to trade. Big banks pump millions and millions of dollars every day into this huge market, working to stabilize it. That is what creates great liquidity, but a ton of fake-outs and traps.

The stock market finally is a good mix of the forex and crypto markets in terms of retail to institutional involvement. There are more institutional investors, funds, and banks getting involved in the stock market than retail investors/traders, but there is still a good amount of retail traders that influence the movements of the market.

Now, whatever market you decide to jump into, you have to follow this same formula if you want to be successful. You can’t skip steps. You can’t skimp out on your education, rush into trading size, or ignore certain key steps in your journey.