Trading vs Investing

Trading and Investing in cryptocurrencies are intertwined techniques, however the difference being the type of strategy each method employs, as both techniques seek to increase the value of your portfolio. They intertwine in the sense that traders can make investments, and investors can always enter trades, with the differences usually revolving around the time frame and period, as well as the trade analysis used. 

Trading cryptocurrency tends to focus on a shorter time frame and period. Traders can engage in day trading, ranging from minutes to hours, leveraging the short-term volatility of cryptocurrency price changes for profit. Investing in cryptocurrency is typically a long time frame and period, with investors adopting a long-term strategy. Investors seek to HODL, sitting on sound investments that will grow over the long term, selling for profit after periods lasting months or years. 

When traders figure out the position of the market and price direction, they will use technical analysis in an attempt to predict future prices based on historical price data, utilising a variety of price indicators and charting tools. Trading strategies include day trading, swing trading, position trading and scalping. Investors often use fundamental analysis as they rely on the long-term viability of cryptocurrencies and blockchain technology. Analysing the project, devs, team, partners, roadmap and whitepaper can allow an investor to establish an intrinsic value of a cryptocurrency, providing further insight into its long term potential. Investing strategies include ‘hold on for dear life’ (HODL), an acronym of buying and holding forever, dollar cost averaging and market-cap weighting of top cryptocurrencies. 

Fees

When trading or transacting with cryptocurrency, it is important to remember that there are fees for placing trades and making transactions. Fees vary depending on the service provider you are using, so always make sure to be aware of what those fees are. Also remember that when you are paying someone in cryptocurrency that you include the fee in the amount you pay them. There is nothing worse than receiving less than what you were meant to because your peer forgot about fees.