The crypto exchange is no different from the other exchanges for a crypto beginner. You need to create a suitable investing and trading strategy to get better returns. In this article, we will be introducing the basic concept of "Trading" and "Investing" to help you define your own cryptocurrency investment strategy.
Guide
- What is Trading
- What is Investing
- Investing vs. Trading: What's the Difference
What is Trading
Trading is a fundamental economic concept that involves buying and selling assets. These can be goods and services, where the buyer pays the compensation to the seller. In other cases, the transaction can involve the exchange of goods and services between the trading parties. In the context of the financial markets, the assets being traded are called financial instruments. These can be stocks, bonds, currency pairs on the Forex market, options, futures, margin products, cryptocurrency, and many others.
In cryptocurrency markets, traders will be able to profit from financial instruments such as spot and derivative trading. As compared to other exchanges, the larger price fluctuation in the crypto exchange allows more opportunities to make a profit.
What is Investing
Investing is allocating resources (such as capital) with the expectation of generating a profit. This can include using money to fund and kick-start a business or buying land with the goal of reselling it later at a higher price. In the financial markets, this typically involves investing in financial instruments with the hopes of selling them later at a higher price. The expectation of a return is core to the concept of investment (this is also known as ROI).
There is a group of long-term investors in the cryptocurrency markets called "HODLers". They are Bitcoin believers who have held Bitcoin for a long time and are convinced that the value of Bitcoin and other cryptocurrencies will continue to grow even more in the future.
Investing vs. Trading: What's the Difference
Investing and trading are two very different methods of attempting to profit in the financial markets. The following table shows the main difference between the two.
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Investing
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Trading
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Main Difference
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Fundamental analysis (FA)
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Technical analysis (TA)
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Strategy
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A long-term strategy that ignores short-term fluctuations
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A short-term strategy that profits from price fluctuations
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Holding Period
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Months
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As short as 5 mins
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Trading and investing are two different methods of earning in the crypto market.Which strategy is better depends on your risk appetite and how much time you have.Trading may suit you if you can constantly monitor the markets and have a risk appetite.However, if you prefer a more stable and secure approach, consider long-term investing.Another way is a combination of both strategies.
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