Using crypto: Trading & Investing

Trading & Investing

WHAT’S THE DIFFERENCE BETWEEN TRADING AND INVESTING CRYPTOCURRENCY?

Investing in cryptocurrency involves buying knowing price rises and falls are inevitable in the short term, but hoping an overall long-term positive trend is more likely.

This is known in the cryptocurrency world as hodling hodlingCryptocurrency lingo – holding cryptocurrency rather than selling it., which is a term adopted on the back of a comment on a Bitcoin community forum intended to be written as ‘holding’ during the coin’s earliest days.

The type of purchase intended for hodling is usually on the back of a buyer having faith in the cryptocurrency’s ability to function as designed, provide a good product and high-quality, functioning blockchain.

Trading cryptocurrency involves buying cryptocurrency with the intention of holding for the short term with the intention of gaining a fast profit.
Traders are less likely to be buying on the back of a cryptocurrency’s credentials and more likely to be using market trends to best determine changes in price.
While this is a more ardent method, cryptocurrency training is in essence the same as investing in that they both seek to gain a profit from price fluctuation.
The major difference is the expected period of time returns will eventuate, which is why many investors also purchase cryptocurrency with the intention to trade, and vice versa.

HOW IS CRYPTOCURRENCY TRADED?

52 million

Cryptocurrency trading has experienced a marked rise in popularity since its beginnings, with over 52 million traders globally holding some sort of digital currency up to mid-2019.

Much of this can be attributed to word-of-mouth, growing media attention and an extended time of function offering proof of longevity.
Cryptocurrency also has trading credentials unique to its markets drawing many away from traditional platforms.

Cryptocurrency is relatively volatile, meaning traders are more likely to make a faster and more extreme profit with correct market anticipation.
New traders also have far greater access thanks to its relative deregulation.
A greater ability to get started with ease comes with requiring much less identity verification and a global 24-hour, seven day a week trading day means traders can access markets at their convenience.

Like in traditional markets, there are several different types of traders on the cryptocurrency market.
Day traders make up a solid proportion of day-to-day activity because of their tendency to build up a large volume of smaller trades in the effort to profit from short-term price movements.
Day traders usually close their trades at the end of their working days and begin fresh the following day.

Day tradersDay tradersHolding a cryptocurrency asset for a very short period of time, usually seconds, minutes or hours before selling in the hope of making a small, but quick profit. Like regular stock day traders.

Scalpers Scalpers Uses technical analysis to find small cryptocurrency price movements to buy and sell as quickly as possible in the hope of making a quick profit. are like day traders in that they try to make profits from short-term price movements, although they differ in the size and regularity of their trades.
Scalpers Scalpers Uses technical analysis to find small cryptocurrency price movements to buy and sell as quickly as possible in the hope of making a quick profit. opt to trade extremely low amounts of cryptocurrency with extreme frequency, collecting small profits at a lower risk.
Swing traders study and attempt to take advantage of price movement, buying cryptocurrency at a low and selling at a set high.
This is like almost all other trading strategies but differs in its strategic implementation of selling limit orders, meaning cryptocurrency will only ever be sold again when it reaches a specific price.

Swing tradersSwing tradersHolding cryptocurrency for longer than a single day with the intention of selling.

HOW DO I PLAN A CRYPTOCURRENCY TRADING STRATEGY?

All traders will generally rely on one of two different types of analytical techniques when it comes to understanding which cryptocurrency to buy and sell and applying a trading strategy.
Fundamental analysis is a broad and long-term approach and the method of choice for most investors.
It considers a cryptocurrency’s long-term and projected performance, its blockchain credentials, global popularity, market cap and new coin distribution policy.
This means current price has less of a bearing on whether a trader invests compared to the cryptocurrency’s overall product value.

Fundamental analysisFundamental analysisDetermining a coin's worth using basic fundamentals, including the motives of the coin’s creators market analysis and economic factors.

Technical analysis is the method of choice for short-term traders and traders in general.
This analysis relies on market statistics and past performance in attempting to predict future price performance of cryptocurrencies.

Technical analysis<br>Technical analysis
Attempting to predict the future performance of a cryptocurrency using tools to analyse its historical data.

Cryptocurrency markets are not so different to traditional markets in their fundamentals, especially when it comes to the lack of guarantees of profits.
While there are no ways of ensuring a return, there are recommended approaches to investing in cryptocurrency offering a reduced chance of losing significant amounts of funds.
Perhaps the most important aspect of trading and investing in cryptocurrency is for traders to avoid risking more than they are willing to lose.
Part of this is understanding the parameters of trade, such as detailing the in and out buy and sell marks, margins of error, expected profit and worst-case scenario losses.

A mistake first-time traders often make is leaving inactive cryptocurrency on an exchange, leaving it susceptible to theft.
Unless it is actively being traded, all cryptocurrency should be kept in a safe and secure wallet, ideally a cold wallet.
Amateur traders also often fall into the trap of trading emotionally, making decisions based on greed and fear.
The difference between a successful and experienced trader and those starting out is how well someone can put emotions aside to buy and sell with solid analysis. 

Using crypto: Trading & Investing

FAQ

How do I invest in cryptocurrency?
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Investing in cryptocurrency involves buying knowing price rises and falls are inevitable in the short term, but hoping an overall long-term positive trend is more likely.

How do you trade cryptocurrency?
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Trading cryptocurrency involves buying cryptocurrency with the intention of holding for the short term with the intention of gaining a fast profit. Traders are less likely to be buying on the back of a cryptocurrency’s credentials and more likely to be using market trends to best determine changes in price.

How do I plan a cryptocurrency investment or trading strategy?
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Strategy combines clearly defined goals with one of or a combination of analytical techniques to understand which cryptocurrency to buy and sell. Fundamental analysis offers details on how to take a broad and long-term approach to buying and selling cryptocurrency for profit and is the method of choice for most investors. While technical analysis is the method of choice for short-term traders and traders in general because it relies on market statistics and past performance in attempting to predict future cryptocurrency price performance.

Which cryptocurrency should I buy?
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Knowing which cryptocurrency to buy is dependent on having a clear plan as how it will be used. Everyday use requires research on compatibility and access, while trading and investing requires a strategy to understand which coins offer the best chance of a return on investment.

When is a good time to buy and sell cryptocurrency?
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Perhaps the most important aspect of trading and investing in cryptocurrency is for traders to invest only when they can afford it and to avoid risking more than they are willing to lose. Part of this is understanding the parameters of trade, such as detailing the in and out buy and sell marks, margins of error, expected profit and worst-case scenario losses.

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