What is crypto-trading
Crypto trading is trading in cryptocurrencies with the aim of making profit on short periods of time. A distinction is made between swing trading, position trading, scalping and intraday trading.
As in case with any traditional asset (stocks, bonds, commodities), crypto trading is based on predicting the future behavior of one or another asset’s price..
You can trade anything: even bitcoin, even memcoins, or any “dubious cryptocurrency.
The main aspects of crypto trading are entry point and exit point. To determine them experienced traders study news and analyze technical indicators. But everyone uses them differently..
It all comes from the fact that the trading patterns of traders are not the same.
We can distinguish the following types of strategies that are available in crypto trading:
- Arbitrage – an option based on differences in value of cryptocurrencies on different platforms. Most often its application is accompanied by the use of trading robots due to high volatility of cryptocurrencies.
<Intraday trading implies trading based on intraday fluctuations of prices for assets.. Deals can take from several minutes to several hours. - Scalping – a special case of the intrade. A distinctive feature is the ultra-fast trading. Transactions are made in a few minutes or even seconds. This style of trading can be characterized by thousands of transactions per day. As in arbitrage, scalping often uses trading bots.
- Swing-trading – a kind of medium-term trading. It takes from one day to several weeks for a trader to hold a position.
<Position trading is a transitional stage between trading and investing. It is& characterized& by& the& study& of& long-term& trends. The period of the transaction can range from a few months to a year or even two years.
Pros and cons of crypto-trading
The main advantage of cryptotrading is the opportunity to make quick profits. If you have a small account and want to speed it up, then this option is just for you.
Intraday movements in cryptocurrency can allow you to earn several tens of percent per day. However there is the flip side of the coin.
A high chance of making money comes with a high risk of losing all your capital. Especially if you use leverage.
It’s worth noting the advantage of crypto-trading over trading traditional assets. There is less dependence on the central office and lower commissions..
And availability is higher. Basically, if you have internet, you can get access to cryptocurrency anywhere in the world.
What is crypto investing
Crypto investing is buying and holding cryptocurrency for a long period of time. The point, of course, is the same as in crypto trading – to increase the value of your assets.
Followers of crypto investing rely more on fundamental analysis than technical. Here they will rather look at such indicators as halving and hashrate than the price change in the dynamics of the chart.
Like crypto trading, cryptocurrencies have different strategies:
- Holding.. The investor bought the cryptocurrency and without any definite period of time is waiting for it to grow in price.
- Averaging. This method is the addition of a certain amount of cryptocurrency after some time. It allows you to average prices regardless of what happens in the market.
- Value investing.. The method is based on identifying cheap cryptocurrencies whose fundamentals show that they will grow.
- Investing in growth. This method involves investing in new cryptocurrencies that are expected to grow in price over time.
- Investing in funds. This involves buying not the cryptocurrencies themselves, but investing in exchange-traded funds and ETFs related to the cryptoindustry.
Pros and cons of crypto investing
The first advantage that has cryptoinvesting can be called protection against inflation. The price of bitcoin due to a number of circumstances historically for a long time rose.
On the other hand, government printing presses only increase the supply of fiat money, reducing the value of.
But you have to understand that not everything that is called cryptocurrency; will protect from inflation – one should be wisely approach the choice of coins.
The second advantage -the growth of potential value. If you look at bitcoin, etherium, Avalanche and some other coins, they have all grown over time.
The disadvantage of crypto investing is the high risk of a decline in the value of assets at a moment. In this case, the time period can be quite long.
If you are ready to wait and overstay, if you have diversified asset portfolio, then you will not be disturbed by this. But if you want to make a quick buck, this is definitely not your option.
Differences of crypto trading from cryptoinvesting
It’s worth mentioning right away that the difference between cryptoinvesting and cryptotrading is purely conditional.
Cryptoinvestor can behave in a number of cases as a trader and vice versa. Yes and the tools used by both groups of traders can overlap.
But, averagely speaking, cryptoinvesting and crypto-trading differ in the following:
- Time frame.. Crypto investors trade long term, crypto traders trade short term.
- Frequency of trades.. Cryptoinvestors rarely buy or sell, and crypto-traders often.
- Trade style.. Cryptoinvesting -is a conservative way to make a profit with less risk. Crypto trading is aggressive trading with high risks.
- Methods of analysis.. Cryptoinvestors rely more on fundamentals. Crypto-traders tend to use techniques of technical analysis.
That said, cryptoinvesting and crypto-trading have something in common. For both trading styles there is an inherent risk of losing investments.
If someone thinks that investments are only profits, they are wrong.. In order to invest and engage in trading, it is necessary to conduct meticulous analysis.
So, cryptoinvesting and crypto-trading are two different approaches to cryptocurrency trading. The first one is based on the fundamental analysis and investing in the future. The second one is based on technical analysis, and its goal is profit here now.