Bitcoin Trading & Investing

Trading and investing are two different ways to try to make money in the financial market. When it comes to investing, the goal is to slowly build wealth over time through purchasing and holding bonds, mutual funds, baskets of stocks, stock portfolios, and in this case Bitcoin. Investors will typically enhance profits by compounding or reinvesting their dividends. Investments are typically held for years so that they can take advantage of rises in the price of Bitcoin and forks. Even though the markets will fluctuate, investors will ride out of these downtrends with the belief that the price will come back and the will recover all of their losses. Investors will look more at the market fundamentals and eventual growth of Bitcoin.

Trading, on the other hand, involves frequent buying and selling of currency pairs, commodities, stocks and in this case, Bitcoin. The goal is to generate a return that will outdo the buy-and-hold investors. Investors may be fine with a ten to fifteen percent annual return or see a ten percent return every month. Traders make money through buying at a low price and then selling it at a higher price within a short time frame. It is also true that they can make profits by selling at a high price and then buying to cover a low price. This is referred to as selling short so that they can profit in a falling market.

Buy-and-hold investors can wait out the less profitable positions, but traders have to make a profit or take their losses within a certain time period. They make use of a protective stop-loss order that will close out their positions at a predetermined price. Traders normally make use of technical analysis tools, like stochastic oscillators and moving averages to figure out the best trading setup.

The style of a trader refers to the holding period or timeframe when Bitcoin is bought and sold. A trader normally falls into one of the following four categories:

Scalp Trader – the trader holds their position for minutes or seconds and never overnight
Day Trader – the trader holds their position during the day only and never overnight
Swing Trader – the trader holds their position for days or weeks
Position Trader – the trader holds their position for months to years
A trader typically chooses their style based on several different factors like risk tolerance, personality, amount of trading experience, amount of time they can dedicate to trading and account size. Both traders and investors are looking to profit from their participation in the market. In general, an investor is looking for better returns over a longer period through buying and holding. Traders take advant