What is The Difference Between Investing and Trading Cryptocurrency
Lot of time new investor get really confused the term called trading and investing.
The word Investing and trading are two very very different ways of making profit in the world of financial markets. The main objective of investing is to gradually build wealth through the purchasing and holding a portfolio of stocks, baskets of mutual funds, stocks, bonds, and other investment instruments. So in simple word is to put your money into any business, assets or forex currency that investor hope that the value of his/her investment value will increase over the time period.
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On other hand the term Trading involves more frequent trades of portfolio of investment, such as the buying and selling of shares, commodities, forex currency pairs, or other financial instruments. The goal is to generate returns that outperform buy-and-hold investing.
Now we come back to the topic of trading crypto or investing in cryptocurrency so we are going to discuss the main difference between investing and trading in cryptocurrency.
Investing in Cryptocurrency
As we just read above what is investing, in simple terms buying actual Cryptocurrency and hold it for long term and be ready to go through rise and drop of Cryptocurrency value for long term.
The main objective of investing in Cryptocurrency a such as Bitcoin to create a long term trading where you buy the actual Cryptocurrency at lower price and wait for few month to year for Cryptocurrency a value go up and sell. this method called hold in financial market.
cryptocurrency investors are mostly known as Hodlers. Hodl is a misspelling of the term”hold.” .
On other hand trading Cryptocurrency is the hold the crypto for short amount of lets say for a day or week in sometime a month and sell it and re-buy the Cryptocurrency when the price is down.
Trading Cryptocurrency profits are generated by buying Cryptocurrency at a lower price and selling Cryptocurrency at a higher price within a very short period of time.
Cryptocurrency Traders generally fall into one of four categories:
- Cryptocurrency Position Trader: Positions are held, starting from months to years.
- Cryptocurrency Swing Trader: Trading positions are held from one day days to few weeks.
- Intra Day Cryptocurrency Trader: Crypto Positions are held entire day only with no overnight Cryptocurrency positions.
- Cryptocurrency Scalp Trader: Crypto Trading positions are held for few seconds to many minutes with no overnight trading positions.