We’ve all heard about the Forex market and trading cryptocurrencies like bitcoin in this market. So, what is the Forex market and what are the benefits of trading bitcoin in this market? In this article, we are going to answer those two questions.
The Forex market is the largest and most liquid market in the world. In this market, currencies are traded 24 hours a day, seven days a week, all over the world. With the growing popularity of cryptocurrencies like bitcoin over the past few years, many forex brokers have begun to accept digital currencies for trading.
So, if you’ve decided that you want to jump in and begin bitcoin trading using your hard-mined coins, it won’t hurt to know some of its benefits.
Standard Forex Trade
Before you embark on this journey of trading Forex using bitcoin, it is a good idea to understand how a traditional Forex trade works.
A Forex trade can simply be defined as exchanging a currency for another at its current value. This isn’t the same as a tourist exchanging his or her currency for the local one. In Forex trading, traders exchange currency with the goal of making profit from the continual fluctuations in the value of one currency against another.
Trading a ‘Pair’
Trading a pair is simply betting that one currency will lose value compared to another, for instance betting that the Australian dollar will lose value compared to the US dollar (AUD/USD) or bitcoin vs. Ethereum (BTC/ETH).
A Forex Trade Using Bitcoin
Bitcoin trading isn’t much different than trading conventional currencies. The only difference is that bitcoin and other digital currencies are decentralized, which in simple terms means they are not issued and regulated by any country’s central bank. If you want to trade this cryptocurrency, our advice is to use only a locally regulated forex broker.
Benefits of Trading Forex With Bitcoin
- Decentralized valuations: Because bitcoin is not tied to a central bank, factors such as country-specific interest rates or inflation do not directly affect it.
- Low cost of trading: A large majority of Forex brokers who accept digital currencies charge very low brokerage fees to attract new clients.
- Security: You are not asked to reveal your credit card or bank account details to effect bitcoin transactions.
- High leverage: A good number of brokers offer leverage for those trading cryptocurrencies. If you are an experienced trader, you can take advantage of the leverage. But if you are new to Forex trading, you should approach the high margins offered by the leverage with great caution as increase the potential for losses.