The Difference between Trading and Investment in cryptocurrency.

Trading and investment are two world which are usually used interchangeably when it comes to cryptocurrency but this two words has different meaning. The main idea behind this post is to enlighten steemit users who does not know the different between this two words.

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What is trading?

Trading can be define as a fundamental economic concept which involves buying and selling of assets. These assets can be either goods or services, this transaction is completed when the buyer pays a compensation to the sellers. In some cases, trading involve exchange of goods or services. This method is common many century back and it called trade by barter. This may be between two or several trading parties.

Trading cryptocurrency means taking financial position on a price direction on a single cryptocurrency mostly against the dollar (crypto/dollar pairs) or sometimes against another crypto through crypto to crypto pairs. Contracts for difference (CFDs) are a particularly popular means of trading cryptocurrencies because they allow for greater flexibility, an example is the use of leverage and also the ability to take either short or long position.

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When taking about trading in cryptocurrency it is a term commonly used when referring to short-term trading, this is a situation where traders actively enter and also exit positions over a relatively short time frames. Nevertheless, this assumption is wrong and in fact trading can also means a wide range of different strategies, for example day trading, trend trending, swing trading and many more others.

What is Investment?

Investment means allocating resources (like capital) with the expectation of a profit return. This may be using money to fund as well as kick starting a business or as simple as buying land with the purpose of reselling later at a higher price. So in financial market investing typically involves funding a financial instruction with the aim of selling later at a higher price.

Expecting return is core when it comes to the concept of investment (also known as ROI). Unlike trading, investment usually takes a longer-time approach for wealth accrual. This is the main objective of any investor is to build wealth over long period of time which may be years or few decades. These can be done in many ways but investors usually use fundamental factors which help find potentially good investment opportunity.

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Investment in cryptocurrency usually refer to buying and holding a crypto assert for the future. This is done after proper research about the token by investigating the project such as price, project team, future project and many more. After you are satisfy with all you have seen and you are confident the price will increase in the future than you can buy and hold that particular crypto asset. This is known as investing in cryptocurrency. Due to the long-term nature of investment, investors do not need to bother themselves about short-term prices fluctuations so they usually stay passive and not worry too much about short-term losses.

The difference between Trading and Investment.

The major aim of trader and investors is to generate profits in the financial market. The difference is the methods use to achieve this goal. However they are quite different.

Generally, most investor seek to generate return over a longer period of time which may take years or even decades. We know investors have a larger time range so this makes their target return for each investment larger.

Trader on the other hand, usually try to take advantage of the crypto market volatility. So this makes trader enter and exit trading position more frequently, and they are usually contender with smaller return when compare with investment since they often enter multiple trade.

Conclusion

When talking about which is better between investing and trading in cryptocurrency is totally dependence on the individual for him/her to decide. But you should make sure before taking your decision, you need to first educate yourself about the market and the cryptocurrency you want to buy than decide if it for a long-term or short term basis. Over time, you will grow confident and be able to determine which is best suited to your financial goals and personality.

Thank you for reading hoping to see you in my next post.

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