What is the difference between trading and investing in crypto?

Today we are going to discuss a divisive topic! Indeed, we have all already heard or read an anecdote about a trader who lets his losing position run, because it’s now for the “long run”!

Yes, being a trader is not something you learn overnight, and it’s very different from investing. This is exactly what we will explore in today’s article, let’s go!

Disclaimer: Our content is intended to be used and must be used for informational purposes only. It is very important to do your own research and analysis before making any investment based on your personal circumstances.

Trading vs Investing

What is Trading? I’m sure most of you already know it, but for the others, it’s about speculating on the rise or fall of an asset in the more or less short term. In the collective imagination, a trader is very often someone who speculates in the short term. We saw this in the movies or in the press during the 2008 crisis.

Although the difference between trading and investment concerns the time horizon, which is generally longer for investment, it would be far too simplistic to equate short-term trading with short-term investment.

The different types of trader

There are indeed several types of traders according to their preferred time horizon. First of all, we have the swing trader, which uses rather long time horizons such as 4 hours or daily. The use of longer time horizons is easier to start trading because the signals generated on them will generally be more relevant.

Indeed, on small time horizons such as 5 min or 1 min, we will be confronted with a colossal amount of false signals, also known as “noise”, sometimes intended to mislead the novice trader. Traders who use such short time horizons are called scalpers, and this is a discipline reserved for the most seasoned amongst us, traders. In short, scalping is a trading style that profits off small price changes. The accumulation of these small profits along the way could become substantial over time. Similarly, one large loss could eliminate the small gains that the trader worked hard to accumulate.

In between these two extremes we find the Day-Trader, which as the name suggests, will open a trade and close it in the same day using time horizons like 5 min, 15 min or 1 hour.

Different types of trading

There are as many types of trading as there are traders. Okay, it’s a bit of an exaggeration but there are a lot of methods or strategies that allow us to open a trade.

Some traders will prefer fundamental analysis, which can be balance sheet analysis as well as the evaluation of the fair value of a company in the case of equity trading. Fundamental analysis can also be used for investment as we will see later.

Others will prefer a more graphical approach. Indeed, most traders are familiar with technical analysis, or at least they know what it is. This includes a whole bunch of “graphical” methods such as supports and resistances as well as countless indicators that help the trader make a buy or sell decision.

There are still other ways of trading such as quantitative trading or arbitrage, which are often reserved for institutional trading, but not only.

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The investor

As mentioned above, the main difference between trading and investing will be the time horizon. Indeed, it is not uncommon for a long-term investment, such as BTC or real estate, to have a time horizon of 10 years or even longer!

Some investment funds specialize in Venture Capital, i.e. they invest in the capital of the company directly, generally with a rather long time horizon.

Besides the fundamentals such as technical analysis, the investor would have a lot more research to do in order to ascertain the value of an investment asset.These include the macro economic factors, risk and reward profile, time horizon of the investment and many more!

To hedge against risk, it is important to diversify and not throw all your eggs into one basket. An example of this is to add the SMART Bots to your portfolio. If you are a holder in crypto, the SMART Bots can trade on your behalf on full automation to help you accumulate profits. That way, you’ll benefit from holding as well as trading.

Crypto Trading Made Easy!

Trade crypto easily, without experience and stress with an automatic trading solution such as the SmartBots from 4C-Trading. The benefits of the automated trading bots are plenty. For one, with the highly volatility in the market, it is simply impossible to stay up all day and night to monitor your positions. However, with the SMART Bots, since they are programmed with advanced trading algorithms, you can sit back and enjoy your life while they trade on your behalf 24/7.

Something exciting is coming soon! Adding to the current SMART BTC, ETH and LINK Bots, we will be launching SMART BNB and SOL to the offering, starting January! Be sure to watch this space so you don’t miss out on this!

Wish to give the SMART Bots a try? We invite you to try them for 7 days for free! Just choose your choice of subscription pack, set up your accounts and SMART Bots using an API, and you’re good to go!

Conclusion

Regardless if you’ve chosen the position of trading or investing, one thing remains true – stay rational and non emotional, have patience and never interfere with the bots should you opt for automated trading! Allocate a longer time horizon of no less than six months to enjoy the possibility of sweet gains from the SMART Bots! The longer your time horizon, the sweeter the gains!

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