Sharemont investments: how does investing different from trading?
Investing and trading are usually used in similar contexts. Be that as it may, the two of them differ in some ways. While there may be some measure of differences between the two terms, it has become very difficult for individuals to properly identify the specific difference between the two. This is because there is rarely a clear line of demarcation between the two. We can say that trading refers to short to medium-term action, while investment, on the other hand, refers to long-term or extended periods.
A good example of a long-term investment is the purchase of shares from a company. In this situation, the investor looks forward to the investment yielding returns or dividends regularly over a long period. This is not the case in trading. In trading, the trader can get a short-term profit due to price fluctuations. The trader can make trading decisions by using trading instruments, which can also provide the trader with a spread of possibilities towards the realization of a considerable amount as profit. Bear in mind that trading activities can be accompanied by certain risks.
How to Trade Cryptocurrency
So, you’ve purchased your first crypto coins, and now you want to learn more about the art and business of trading in the cryptocurrency market?
Look no further: this beginner-friendly guide contains all the basic information you should be able to understand beforehand, as well as the fundamental steps you need to take in order to kick off your crypto trading game safely and successfully.
What is Cryptocurrency Trading?
There are many helpful guides on how to trade cryptocurrency available online, but not many of them go over the basics of what trading with cryptocurrencies really is. Simply put, crypto trading refers to the process of speculating on price fluctuations of a certain digital currency by continuously buying and selling your digital coins in order to make a profit.
In the context of crypto trading, you may often see specific terminology being used, such as “entering a long/short position.” These refer to either buying (“going long”) if you deem that the value of a specific crypto token will go up, and selling (“going short”) if you believe that the value of the token will decrease.
The main difference between holding onto your crypto investments and crypto trading is that cryptocurrency investors acquire and hold onto their assets for an extended period of time, ranging from months to years. Cryptocurrency traders, on the other hand, hold onto their coins for periods ranging from a few minutes in the short term, to several weeks in the long term.
Investing vs Trading: Understanding the Difference with Mining
When it comes to the world of finance, investing and trading are two distinct approaches to generating returns. Investing typically involves buying and holding assets for the long-term with the expectation of profiting from appreciation in value over time. Trading, on the other hand, involves buying and selling assets in a shorter timeframe, often with the goal of taking advantage of short-term price movements. Crypto mining hosting, a process used to acquire cryptocurrencies like Bitcoin, can be considered a form of investing since it involves holding the asset for the long-term with the expectation of generating a return as the value of the asset increases over time. Trading cryptocurrencies, however, involves buying and selling them in a shorter timeframe based on market conditions, technical analysis, and other factors. Overall, the key difference between investing and trading is the time horizon and the approach to risk management.
Register on a Cryptocurrency Exchange
The easiest way of kickstarting your crypto trading game is to register an account with a crypto exchange or brokerage.
There are many established platforms offering crypto trading services to coin holders, and the most renowned ones offering a wide selection of cryptocurrencies would be Coinbase, Binance, Kraken, and Gemini.
All of the above platforms offer a simple and intuitive user interface coupled with high levels of security, whereas the choice of which of them to use on a daily basis is up to your preferences. Do you want low fees? A good mobile app? Specific altcoins to trade in? These are just some of the criteria you should research and consider when picking your first one-stop shop for crypto trading.
Creating an Account
In order to create an account with a cryptocurrency exchange, you will be required to provide personal information, such as your real address, date of birth, social security number (if you live in the United States), and email address, among other Know Your Customer (KYC) requirements. You might also be asked to provide a scanned copy of your passport or national ID card.
Once you’ve successfully joined a crypto brokerage, you will need to connect your bank account to your online wallet. The majority of cryptocurrency exchanges accept deposits in the form of debit cards and wire transfers. Depending on the platform, you might need to pay certain accompanying bank transfer fees when filling up or withdrawing funds from your account.
Choose a Token to Trade In
The majority of active cryptocurrency traders choose to put their money into top cryptocurrencies like Bitcoin and Ethereum, and these might be a good place to start for beginners. The reason would be that more established currencies usually move more predictably than smaller ones. This makes the process of trading simpler and alleviates some of the associated risks (though they are always present, no matter the currency).
As you start to learn more about the crypto market and some of the newer, promising projects, you may then choose to invest a portion of your funds into those. Although small and mid-range coins are nominally a riskier stake than large-cap currencies the likes of BTC and ETH, they actually have a greater potential at upscaling. Indeed, it isn’t uncommon for the value of a minor cryptocurrency to grow exponentially in a matter of months, subsequently growing their investors’ profits by a thousandfold in a short period of time.
Overall, any guide to cryptocurrency will tell you that the inherent volatility of the cryptocurrency market is both its main appeal, as well as its major drawback. It’s appealing to high-volume traders because the frequent price fluctuations can bring quite a bit of profit to those who know when to buy and when to sell their coins.
However, the drawback is also obvious: there have been many projects with lots of backing, but which ultimately flopped, resulting in zero returns on investments, as well as a total loss of capital funds.
Although no one can exactly predict the price movement of any crypto token, lots of research, practice and experience play a huge role in helping traders make smart estimations.
Research Trading Methods
In the cryptocurrency market, there are two main trading methodologies that incorporate what is called fundamental and technical analysis.
Technical analysis depicts an asset’s complete price history, whereas fundamental analysis focuses on current events that impact the price of a token, such as news events, or the sudden investment by a multimillion dollar company.
To optimize your chances of making a profit, a mix of both strategies is optimal, though this takes a certain level of skill to accomplish.
However, generally speaking, you can always start staking the crypto coins you currently hold in order to generate passive income on the long-term value uptick. This is one of the simplest ways to profit from cryptocurrency in the long run.
It’s always good to keep in mind that trading cryptocurrencies is not a get-rich-quick type of deal. Indeed, successful trading requires lots of dedication, practice, and accumulated expertise. Even expert traders are able to make mistakes and incur losses from time to time — as previously stated, cryptocurrencies are volatile.
Conclusion and General Advice
Why trade cryptocurrencies to begin with? Despite its high volatility, many believe that digital money is the way of the future. And, considering the decentralization efforts by the majority of crypto projects, it is quite appealing to visualize a future in which finances are not controlled and taxed by high-powered central entities like banks and governments.
By learning how to invest and trade in cryptocurrencies, thereby participating in the crypto market, you become one of the hundreds of thousands of people actively contributing in making that future possible for all of us. Sounds pretty cool, doesn’t it?
However, don’t forget some of the following tips when starting out in the crypto trading biz:
- Never invest everything you own into crypto. Cryptocurrencies, like any other financial asset, can make you lose money. A smart investor will choose to invest only up to the amount that they can afford to lose. The recent market drop across all crypto projects was unexpected, but it happened. Even if you do everything by the book, there is never a 100 percent assurance that you will receive your money’s worth. Therefore, always keep a reserve fund for yourself in case things go haywire — temporarily or for the long term.
- Use demo or dummy accounts. The cryptocurrency market is dynamic and changes on a regular basis, and there is no safer method to learn about the market than to begin trading through demo or dummy accounts. These kinds of accounts are often available through established exchanges and they can really assist you in learning how the real market works.
- Expand your asset portfolio. Investing in digital assets can be profitable, but it also carries the risk of total loss. Diversifying among the many cryptocurrencies that are available allows you to reduce your losses if the price of one cryptocurrency falls.