How to choose a market to trade

What are the markets for trading?

Once a person enters the world of trading, they are faced with a huge number of opportunities and new horizons, but they are also faced with many choices to make. At the start of their career, traders are faced with two extremely important decisions: which trading style to trade and which markets to work in. Now we will talk about the types of markets to trade, and how to catch the mats and choose your ideal one.

In the modern world, a trader has a whole list of available markets for trading. It includes stock, forex or foreign exchange, crypto, commodities and others. You can trade anything from Apple stock to rice, from EUR to oilcake. However, each market has its own peculiarities, and in order for your work to be successful, it is important to find the one whose peculiarities will suit you and your trading strategy as much as possible.

Foreign Exchange Market (ForEx)

One of the most popular markets to work in is the currency market, which is also often referred to as the forex market.

It is the largest and most liquid financial market in the world, with more than $6 trillion dollars worth of transactions taking place every day. Forex operates 24 hours a day, five days a week, covering all time zones and bringing together participants from all over the world.

Forex trading is the exchange of one currency for another in order to profit from changes in exchange rates. The main market participants are central banks, commercial banks, financial institutions, corporations, investment funds and private traders.

Forex trading is often conducted over-the-counter, that is, without a physical exchange of assets. Rather than using a central exchange such as the New York Stock Exchange, the forex market is managed and controlled by a global network of banks and financial institutions.

In the forex market, traders trade currency pairs. This pair consists of two different currencies. They indicate the current value of one currency relative to the other. Each currency in the pair is designated by a three-letter code, the currency ticker. These codes usually consist of two letters indicating the region of origin of the currency and one letter indicating the currency itself. For example, the US dollar code is USD and the British pound sterling code is GBP.

The first currency in the pair is called the base currency and the second currency is called the quote currency. For example, if the EUR/USD pair quote is 1.06, it means that 1 euro (EUR) is equal to 1.06 US dollars (USD).

There are a huge number of currency pairs in the forex market, however, according to CMC Markets, 7 major pairs account for over 75% of all trades. These major currencies include: the US Dollar, Euro, Japanese Yen, British Pound, Australian Dollar, Canadian Dollar, Swiss Franc and New Zealand Dollar.

If you want to delve deeper into the functioning of the foreign exchange market, we recommend reading this material.

Advantages and disadvantages of the forex market

One of the main advantages of the forex markets is its liquidity. Forex is the largest financial market in the world, with trillions of dollars traded every day. This means that currency pairs can be easily bought and sold at any time, with virtually no delays. High liquidity also contributes to a smaller spread between buy and sell prices (spread), which reduces trading costs for traders.

Another important advantage is the 24-hour market operation. The forex market operates 24 hours a day, five days a week, thanks to a global network of financial institutions located in different time zones. This allows traders from any part of the world to trade at any time convenient for them, without being limited by standard working hours. Although, of course, we should not forget that depending on the trading session, different trading pairs are more or less liquid.

Another undoubted plus is that on Forex traders can trade with the use of leverage, thus lowering margin requirements and increasing the amount of funds in the position. And, of course, the entry threshold to the forex market is low - and this is a definite plus, as it is available to everyone.

The forex market, despite its many advantages, can scare some traders away with its volatility. Volatility in the forex market is caused by several factors, including economic indicators, political events, central bank monetary policy and global news.

Economic indicators such as unemployment, inflation, gross domestic product (GDP) and interest rates have a significant impact on exchange rates. The release of this data often leads to sharp market movements as traders react to the new information. For example, if U.S. unemployment data comes in better than expected, it can lead to a stronger U.S. dollar, as a strong economy can boost the currency. Political events and instability also play an important role in forex market volatility. Changes in government, elections, international conflicts and political crises can cause significant currency fluctuations. Global news and events can also cause volatility in the forex market. Catastrophes, natural disasters, pandemics and other major events can cause unpredictable movements in the currency markets. For example, the COVID-19 pandemic caused significant currency fluctuations around the world as the economic outlook and investor sentiment changed as the situation unfolded.

Forex traders need to take these factors into account and be prepared for the high risks associated with volatility.

Forex Market Hours

The forex market operates around the clock, from the opening of the markets in Australia to the closing of the markets in the United States. Due to the fact that the forex market is global and spans several time zones, it is important to understand the hours of operation of the main trading sessions (times shown are in accordance with Kiev summer time):

Sydney session (Australia):

• Opening: 00:00
• Closing: 09:00

Tokyo Session (Asia):

• Opening: 02:00
• Closing: 11:00

London Session (Europe):

• Opening: 10:00
• Closing: 19:00

New York Session (North America):

• Opening: 15:00
• Closing: 00:00

The most active and volatile periods in the Forex market usually occur during overlapping trading sessions. For example, the overlap of the London and New York sessions (from 15:00 to 19:00 Kiev time) is one of the most active trading periods, as traders from both major financial centers are present in the market.

Stock market

Whether you use Apple or Samsung, you can easily find shares of these companies on the stock market. And not only find them, but also trade them. As you have already realized, the stock market is the one where stocks, bonds and other financial instruments are traded. It functions as an intermediary between buyer and seller.

The stock market has two main components: the primary market and the secondary market.

In the primary market, companies issue new shares through an initial public offering (IPO). This allows companies to raise money for business expansion, new product development, or other purposes. Investors buy these shares directly from the company, which allows the latter to obtain the necessary financing.

The secondary market is where already issued shares are traded between investors. Here shares are bought and sold through stock exchanges - and this market interests traders much more. Some of the most famous stock exchanges in the world are the New York Stock Exchange (NYSE) and NASDAQ. You can learn more about them here.

The stock market plays a key role in the economy by providing liquidity and the ability to redistribute capital. It also serves as an indicator of a country's economic health, as the value of major indexes often reflects the overall health of the economy. Investors in the stock market can earn a return through increases in the value of stocks or dividends paid by companies. Stock prices fluctuate depending on supply and demand, company performance, and economic conditions.

It is very common to see how a company's stock price reacts to certain changes and innovations within the company. For example, if a company announces the release of a new product that analysts and investors believe has a high potential for success, this can cause the stock price to rise. On the contrary, if the company faces internal problems, such as declining profits, scandals, or the resignation of key executives, the stock price may plummet. The trader's job is to predict the movement and take appropriate action.

In addition to stocks, bonds and ETFs are traded on the stock market.

• Bonds are debt securities that are issued by companies or government agencies to raise capital. The buyer of a bond provides a loan to the issuer, who agrees to repay the amount borrowed within a certain time frame and pay interest (coupons) throughout the life of the bond.
• Exchange Traded Funds (ETFs) are investment funds whose units are traded on exchanges like stocks. They allow investors to access a basket of stocks or other assets, giving them diversification.

Advantages and disadvantages of the stock market

Stock markets attract investors from all over the world because of its several advantages. One of the main advantages of trading in the stock market is the opportunity to earn significant returns. Investors can earn from stock appreciation, dividends, and speculative derivatives. In addition to the opportunity to earn income from stock appreciation, investors can expect passive income through dividends paid by the stock. Many companies pay regular dividends to their shareholders, which can be a fairly stable source of income.

In addition, the stock market is one of the most liquid markets in the world, which means that it is possible to buy and sell securities quickly and easily at the market price. This makes investing in the stock market very affordable. In addition to this, the charts of stock assets are usually quite technical and if you have the skills, they are analyzable and therefore, there is a huge amount of profit making opportunities. Another undoubted advantage of the stock market is its transparency. They are usually strictly regulated, which ensures transparency of operations and protects the interests of investors. Companies are required to disclose financial information on a regular basis, which allows investors to make decisions. And, of course, we can't ignore the fact that historically, the stock market has shown steady growth over long time periods. Investing in quality companies can lead to significant capital appreciation over the long term.

Of course, we will also add a spoonful of tar: stock markets are considered to be quite volatile and riskier investments, as many factors influence the price of a company's shares. However, as in any market, there are both more conservative assets that are subject to less volatility and high-risk and high-volatility assets.

In addition, the value of securities can also be affected by a variety of external factors such as economic policies, international events, regulatory changes and corporate news. These factors can be unpredictable and beyond an investor's control. Working in the stock market, you may not be able to buy half a stock, such as buying half BTC In the cryptocurrency market, only a whole number of shares are available for you to buy - this is worth remembering.

The commissions that investors have to pay to participate in the market cannot be overlooked: trading on the stock market is associated with various commissions and fees, including brokerage commissions, asset management fees and other operational costs. These costs can reduce an investor's overall return.

Stock market hours of operation (Kyiv Daylight Saving Time)

The hours of operation of stock markets depend on the specific market and its location. Let's take a look at the most popular stock exchanges:

New York Stock Exchange (NYSE) and NASDAQ (USA):

• Additional trading hours (pre-market session): 15:00 - 16:30
• Opening: 16:30
• Closing: 23:00
• Additional trading hours (post-market session): 23:00 - 3:00

London Stock Exchange (LSE):

• Opening: 10:00
• Closing: 18:30

Frankfurt Stock Exchange (Xetra) (Germany):

• Opening: 10:00
• Closing: 18:30

Tokyo Stock Exchange (TSE):

• Morning session: 03:00 - 05:30
• Afternoon session: 06:30 - 09:00

Cryptocurrency market

The cryptocurrency market is the youngest market for trading digital assets. Unlike traditional stock markets, the cryptocurrency market operates in a decentralized manner, using blockchain technology to ensure secure and transparent transactions. This means that transactions take place directly between market participants without the need for a central intermediary such as a bank.

The cryptocurrency market attracts participants from all over the world. It is a global ecosystem where investors and traders from different countries can interact and trade cryptocurrencies. The global nature of the market also contributes to its high liquidity and constant activity.

In the cryptocurrency market, a user can trade both the market's mastodon - bitcoin - and altcoins - all alternative BTC tokens. There is a huge number of cryptocurrency pairs, and a user can trade both cryptocurrency to digital dollar (e.g., BTC/USDT) and cryptocurrency to cryptocurrency (e.g., BTC/ETH pair).

Advantages and disadvantages of the crypto market

Working in the cryptocurrency market has many advantages that attract a huge number of users from all over the world. One of the key advantages is the ability to trade around the clock. Unlike traditional markets, cryptocurrency exchanges operate 24 hours a day, 7 days a week, which allows traders and investors from different time zones to make transactions at any convenient time. This provides flexibility and accessibility for everyone. In addition, the decentralized nature of the cryptocurrency market provides investors with significant autonomy and independence. Transactions take place directly between participants, without the need for intermediaries. This not only speeds up the trading process, but also reduces transaction costs.

The cryptocurrency market is considered to be the most volatile market, and if you know how to deal with this volatility, you can make it work to your advantage. Volatility creates opportunities to make significant profits in a short period of time.

Of course, the ease of entering the market cannot be overlooked. Opening an account on a cryptocurrency exchange usually does not require complicated procedures and takes no more than an hour together with verification. At the same time, the minimal requirements for initial capital make the cryptocurrency market accessible to a wide range of people, including those who are just starting their journey in investing and trading.

Despite the huge number of advantages, crypto markets also have their disadvantages. The same volatility, which we considered to be an advantage, can be considered from the other side: cryptocurrency prices can fluctuate dramatically in short periods of time, which creates both opportunities for profit and great risks of loss - that's why you can't last long on the markets without knowledge and skills. Volatility can be used to your advantage and professional traders treat it with warmth, but if you don't know what to do with it, you can pay dearly for a mistake.

Another major drawback is the lack of regulation and legal uncertainty. Unlike traditional financial markets, the cryptocurrency market is still in its infancy and lacks clear and uniform rules. This can lead to various problems including fraud, market manipulation and lack of protection for investors. Regulators in different countries have different approaches to cryptocurrencies, ranging from a complete ban to partial or full recognition. This legal uncertainty may create additional risks and difficulties for market participants.

Opening hours of crypto markets

The cryptocurrency market operates 24/7, which distinguishes it from traditional markets with their limited opening hours. This is due to the fact that cryptocurrencies are not tied to any states or central banks, and trading takes place on various platforms and exchanges around the world. Nevertheless, cryptocurrency markets and their behavior depend on active trading sessions. And just as other markets "go away for the weekend," volatility in crypto markets often "go away for the weekend" with them.

Is it possible to trade in multiple markets?

Every trader sets his own limits, which means that no one forbids you to trade on several markets at the same time: for example, forex and crypto markets. Nevertheless, most traders still give preference to one of the markets - that is, there is always a "favorite". The most important thing is to learn how to manage your time so that your efficiency is enough for trading. However, if you notice that you are spreading yourself thin and you do not have enough time for everything, you should narrow your focus.

Multi-market trading in proprietary firms

Prop trading firms allow traders to trade a variety of assets that don't necessarily belong to the same market. There is a whole list of prop trading firms that allow traders to work on multiple markets at once within the same platform. This means that if you prefer to trade currency and crypto markets and want to get, you don't have to look for multiple platforms in order to have your wish fulfilled: you can find a suitable option in the form of a firm that allows you to work on several markets at the same time or open accounts on different markets and work in parallel.

How to choose the right market for trading: tips from the CRYPTOLOGY.KEY team

To work, you should choose the market that you "like" - the one you understand best. Each market functions differently, and the tools that are relevant on the stock market may not work as well on the cryptocurrency market. For this reason, your main task is to narrow your focus and concentrate on those assets where your trading strategy performs best. Your trading strategy is a reflection of your view of the market. How you open a position and by what rules = how you see the market, so the markets where your strategy performs best are the most suitable for you. In order to make up your mind on this issue, you can try several markets and then draw conclusions.

Although, of course, this does not mean that you will have to trade only one market for the rest of your career. You can have several trading strategies for different markets to maximize your performance.