Five things you should know about crypto

History of Trading and Stock Markets

Although trading can generally be traced way back to prehistoric times, the first real stock markets did not appear until the 1500s. In the past, investors were known to visit coffee shops regularly to buy and sell stocks. After a while, they decided to create a marketplace for the sole purpose of doing that. Officially, the first stock exchange was the Amsterdam Stock Exchange (ASE). It was created in 1602.

Stock Trading (Source: FXTM)

Another old exchange was the London Stock Exchange (LSE), founded in 1801 but on which, due to a previous government order, companies were not allowed to issue shares until the year 1825. The New York Stock Exchange (NYSE) was created in 1817 and began trading shares immediately. While LSE became the major market in Europe, NYSE served the United States and the rest of the world.

The stock market continued to evolve as several countries began to create government-regulated markets for trading stocks. All over the world today, there is hardly a country without a stock market. Currently, the largest stock markets in the world based on market capitalization include the New York Stock Exchange (NYSE), NASDAQ, Tokyo Stock Exchange (TYO), and London Stock Exchange (LSE).

The Effects of Cryptocurrency on Stock Markets

Before the emergence of cryptocurrency, there were some peculiarities of the stock market for decades. First, the stock market is heavily regulated by federal agencies like the Securities and Exchange Commission (the SEC) to ensure that there is fairness in trades.  Cryptocurrency, on the other hand, derived much of its appeal from the fact that it is unregulated. That is, there is no government agency in charge of regulating or interfering with it. This has made the cryptocurrency market fascinating to investors who seek to explore its potentials. 

The emergence of cryptocurrency also brought a new dimension to the market. Cryptocurrency markets operate 24/7, every day of the year. This is in contrast to the stock market which closes in the evening and reopens in the morning. The stock market also remains closed during the weekends and public holidays. With the emergence of cryptocurrency, several traders decided to invest in them rather than in stocks. Others remain with the stock markets because they believe they are more secure due to government regulations. However, many traders also hedge their bets on both markets.

General Tips To Think About When Trading In Stock Markets

Here are some of the tips that can come in handy for every trader in the stock market:

  1. Don’t make decisions based on your emotions.
  2. Do not invest more than you’re willing to lose.
  3. Develop a good trading strategy before you start trading.
  4. Do not overtrade. Focus on the company’s value rather than the short-term surge in its share price.
  5. Take your time in making key decisions.
  6. Research extensively before investing.

Five Tips for Trading in Cryptocurrency Markets

  1. Set profit targets and your stop-loss order before trading.
  2. Research the cryptocurrency before you invest in it.
  3. Do not put all your eggs in one basket. That may cause significant loss.
  4. Make an effective trading plan before you start trading.
  5. Keep your emotions in check and have an exit strategy in place.

Comparison of Stock Markets and Cryptocurrency Markets

  • Volatility – Cryptocurrencies are known to be very volatile. They tend to record drastic price changes within a very short period. Although many people have profited from the volatility of the cryptocurrency market, many others have also lost their capital due to it.

  • Fees and Regulations – The stock market is heavily regulated with several rules to protect traders and investors. However, to trade on the stock market, there are several commissions and fees that you will have to pay. The cryptocurrency market, on the other hand, is free from regulations. It also involves fewer commission costs.

  • Risk Involved – Both markets are relatively risky. It depends on the trading strategy that is used. However, cryptocurrency markets are more unstable.

Frequently Asked Questions

  1. How Does Trading Cryptocurrency Work? – Cryptocurrency trading involves the buying and selling of cryptocurrency coins via an exchange or speculating on the price movements of cryptocurrencies via a CFD trading account.
  2. What is a cryptocurrency trading bot? – A cryptocurrency trading bot constantly monitors the market and sudden price changes and reacts accordingly based on the pre-determined rules given by the trader.
  3. What is Leveraged Cryptocurrency Trading?– Leveraged cryptocurrency trading is a trading strategy that allows you to control more sizeable positions than what was required to open the position. This strategy guarantees more potential profits. However, it can also result in higher losses.

The information on this website and all associated literature are for educational and informational purposes. It does not constitute a fiduciary duty or obligation between Uncut Lab and you. Please consult your financial and investment professional for your specific situation.

author

Lucas

I am the Uncut Lab resident cloud computing junkie. I help curate the written content in our Education Corner, providing engaging articles on foundational concepts in cloud computing, data analytics, machine learning, and blockchain technology. Feel free to reach out to me with questions or topics that you would like us to cover. Thanks!

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