Trading Vs. Investing - Both work and they are suited to different individuals

Trading Vs. Investing - know what you are doing

The difference between investing and trading is pivotal in your success or failure, be it in crypto or conventional equities. It is very important to ask yourself, what your intent is and whether or not you want a passive or active strategy.

Investors predict long term appreciation of an asset, cost basis doesn't really matter.

Traders predict appreciation or depreciation of an asset in a short period of time.

Both are speculative and have been recognized methodologies started in equity markets since the early 1900's. Yes, I've heard it before, if they worked everybody would be rich....true if everyone wasn't a victim of their emotions. How about, if they didn't work, they wouldn't be used today.

There are pros and cons to each method but before you put any hard earned cash to work it is important to come up with a plan. Even more important, if you have a gambler's personality, this is not the space for you.

Time is money right?

Investment allows time and flexibility in reaching your goal. No nailing the bottom, never go all in. Investors scale often buying a little high and as long as you have more capital, averaging down your cost basis.

Think about capital in fractions, allocate the total funds you ultimately wish to acquire. Today you purchase 1/5 of the position. Next week the price drops due to normal market fluctuations. Add a scale and now you are at 2/5 - you do this until you have acquired the full desired position on the basis that the equity or asset will continue to appreciate in the long run. In investing I personally recommend leaving an additional scale until you see the move you are after - so that you can continue to average down.

It is also important for investors to know when to sell, when the investment failed - don't be Pershing Square and Valeant Pharmaceutical, riding a stock down from $200 to $7.

Investing is not an all in approach. Trading is.

Trading an equity or asset class with the anticipation that the value will move swiflty in either direction by entering and exiting in a full scale approach, no averaging down. If a trade goes against you, close out right away. Use sell stops or conditional orders to prevent exorbitant losses.

This distinction is key, Investors believe in the asset where traders believe in the current short term price action.

Trading requires discipline and patience and quite often you will find, we don't pay attention to news unless it can't be ignored - like saber rattling north korea.

I will add, however, we like to play with house money, so if we land a crazy pop, sell half at 100% and play for free allowing for flexibility in volatility, but don't fall in love either. I personally will only hold if there is some strong fundamental reason too.

I do not recommend trading for anyone without experience or proper research.

Technical Analysis:

Traders most often rely on the analysis of charts, the statistical data driving price action visually represented in the form of a chart and various tools applied to it, including moving averages, the famous MACD, volume etc.

Fundamental Analysis

Researching a given asset for clues about its future value relative to its current balance sheet. This makes it harder in cryptos as we don't get to see the health of the companies behind each token. Fundamental Analysis on crypto is in my opinion, very basically, what is the value proposition? More technically, and this requires savy, can they achieve the value proposition?

There is a place for both trading and investing in crypto - its a function of style, tools, education, interest and time. If you would like to learn more, Investopedia is a phenomenal resource. I will be covering these in later articles most certainly, but time is money the more you learn faster the better off your investments or trades will be.

In technical analysis there is also room for experimentation. For example I have multiplied all indicators and moving averages by 3.4 to account for the 24 hour trading day and it has smoothed out the indicators and made the moving averages more reliable in my opinion.

As a trader don't be the guy who always buys high and sells low.

As an investor, don't be the guy who misses the move.

Ultimately preserve capital, never put 100% of your portfolio into anything, even 15% is a little high for my liking.

The most important of all, however, is know when you are gambling. Nobody wants to get 'fleeced' but gamblers do it to themselves.

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Follow at your own risk, Not a financial adviser, understand the risks associated with trading and investing. Manage your own Risk - in other words you could lose it all and I could give a fuck.