a year ago

Investing vs Trading: Know the difference!

Most beginners have a lot of questions about cryptocurrencies and how to get acquainted with the use of the technology. Aside from technical aspects there is also a strategic component involved that is not concerned about those questions, but on how you like to enter the market.

There are typically two types of market participants, namely traders and investors. What shapes the views of both groups and how do they tackle the market?

Traders focus on the market

While a trader typically chooses to trade only lower timeframes, he might also get involved in so-called long-term plays. Meaning that he will trade a position over a longer period of time. The crucial point for traders is not necessarily the timeframe that they are dealing with, but the fact that they are more focused on the market.

It is not important to them what kind of coin or token they are trading. If the market is showing the right signals that are looking promising, a trader will try to take the opportunity and possibly make some profit.

Therefore, most traders are more interested in analysing the market and identifying promising trends.

Investors focus on the product

An investor might take some interest in the market and its trend to define when to enter or when to exit his investment. However, that is not the most important aspect to him. He is usually highly interested in what he is buying and what kind of possibilities might arise for his investment over time.

That being said, an investor will typically focus on a longer timeframe, since most investments will take month or even years to bear fruit. An investor tries to understand the underlying technology of a cryptocurrency in order to assess possible scenarios on the impact that the technology might have in the future.

Investors are often interested in the developers of a cryptocurrency and their long-term goals that they like to accomplish.

Eating the cake and keeping it

While many beginners start to learn the necessary skills to be a trader or an investor you can always choose to be both. In some cases, it might be not interesting or promising to invest in an asset, but it can possibly be a lucrative endeavour to trade it.

Other opportunities might arise over time and it makes sense not to trade certain assets, but to keep them as an investment. Always keep in mind that each path requires a different skill set that you have to learn in order to be successful.

So, before you start ask yourself these questions: What would you like to become? A trader, an investor or both?

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