Before buying a cryptocurrency, you need to decide whether you want to trade or invest in it. Despite the decision you take, it is recommended to use crypto tracker to ease your trading process and make it more productive.
Getting to the main point, investing and trading are two different things, each of them requires different tactics and understanding these differences is critical. Thus, let’s find out what’s the difference between these two.
The biggest difference is that risks involved in trading are much higher than the risks involved in investing. The reason is the following; trading is one of the most difficult jobs when it comes to making money, as in order to be profitable in trading, you need to have several skills.
First and most important aspect is psychological factor (almost no one talks about that). In trading, the emotional factor is what can make you loser or winner, as even if you have the best strategy in the world, you have to comply and do specifically what needs to be done at a specific time and moment.
The problem is that the market is volatile and you, following the market, most of the time perceive wrong signals. For instance, if you know that a certain point of the chart at which you need to buy, however, the market starts falling like crazy, you change your mind and don’t buy because of the fear and that’s because you are not trained to surpass that psychological wall.
That is why 95% of people are able to make profits with demo accounts; however, all of them lose when they trade with real money, as you do not trade on real money and there is no psychological factor on demo accounts.
Another important thing is the risk management, where you have to comply at certain terms and conditions that your strategy needs. For example, if you decide not to risk more than half percent, you have to be very clear on that, as otherwise, it can bring dramatic results.
If for any reason you lose money, you are required to wait until the next opportunity comes, and not trade again after losing, risking twice, in order to recover the last trade. As not following your strategy you do that, you are going to increase your risk and it can become a casino instead of trading, when you try to get back your losses, risking more and more.
If you lose 25% of your initial capital, you need to have 50% profits in order to be at break even. If you lose 50% of your investment, you need to have 100% profit or double your capital in order to break even. And I am not talking about losing more than 50%, as it can be dreadful. There are emotions that are going to effect on your trading the same way.
But trading is not only emotions or psychology, it is to understand the whole market where technical and fundamental bases get mixed.
One and last important thing is that you need to setup a strategy where your emotional and trading skills meet each other and that is where you can be successful, as you can be confident on you and your strategy. Fortunately, there are good strategies that can meet your psychological demands.
Investing is another great way to make money, but it is a little bit different, as it is less aggressive and less emotional, because of the following factors.
Investing is buying a crypto–assets for long–term period, based on fundamental analysis – deep study of cryptocurrency’s different elements, like business model, development team, technical background, roadmap and plans for the future, cryptocurrency’s supply and potential demand, etc.
Investing in a crypto coin means you believe in crypto–asset and you are ready to HODL it for quite a long time until the market stabilises and runs on higher market cap, which means higher value for cryptocurrencies.
To conclude, both traders and investors look for profits through the market. Typically, investors search for larger profits over a long period by buying and HODLing cryptocurrencies. On the contrary, traders take advantage of crypto prices moving up and down to enter the market and exit positions over a shorter period of time, taking smaller, more frequent profits. In any case, you trade or invest you will need crypto trackers and if you want to find out more about crypto tracking platforms, check this instructive crypto portfolio tracker guide.