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Crypto investing vs trading: What suits you better

Crypto investing vs trading: What suits you better

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By CNBCTV18.com  IST (Published)

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If you're considering getting into crypto but not sure what to do and how to do it, you've landed in the perfect place. There are two diverse ways of creating wealth from cryptos: investing and trading. Both offer lucrative returns but entail very different methodologies. So, tag along as we discuss these strategies and help you decide which is better for your needs.

Every day we hear stories of miraculous gains coming from the crypto market. Therefore, it is quite natural that you might want to try your luck with these digital assets as well. However, if you're considering getting into crypto but not sure what to do and how to do it, you've landed in the perfect place.
Firstly, there are two diverse ways of creating wealth from cryptos: investing and trading. Both offer lucrative returns but entail very different methodologies. So, tag along as we discuss these strategies and help you decide which is better for your needs. Let's go!
Investing vs Trading
Trading and investing are essentially the buying and selling of various cryptocurrencies. However, the duration between the purchase and sale of these assets differs immensely in investing and trading.
With trading, you hold on to assets for short periods based on certain indicators and sell them for a profit soon. Whereas with investing, you buy assets that you think will grow exponentially in the coming months or years, without a predetermined precise selling price.
While there are many other differences between investing and trading (as noted below), perhaps the only commonality between the two is the importance of a good crypto exchange. In this regard, WazirX offers low transaction fees, super-fast processing, and best-in-class security.
This ensures that, as long as you have your research and planning in place, you have nothing else to worry about. With WazirX, you can trade/invest in crypto with complete ease. Now, back to the differences between crypto investing and trading.
Research
With investing, you need to know about the crypto projects, their vision, long-term goals, the leadership team and more. This information gives you an idea about the possibilities of success for a particular project or token. These are known as the fundamentals of the project.
With trading, you need to be updated about the trading volumes, price charts, market conditions, several different ratios and many dynamic variables that can help you bet on the rise or fall of a token. These aspects are known as the technical indicators of the project.
While the parameters may differ, both trading and investing require thorough research. Putting your money on the line without proper knowledge and understanding is never a good idea. It could lead to unsuccessful trades/investments and heavy losses.
Time horizon
Time horizon refers to the timeline you've set for your goals. When it comes to investing, the time horizon is usually years, and it requires patience. With trading, you're taking money in and out of the markets depending on fluctuations. And, in most cases, trading positions can last for as little as a few hours.
An active or passive approach
As an investor, you do not need to be actively involved in the day-to-day happenings of the markets. This is because short-term volatility will not affect your long investment horizon.
On the other hand, traders have the task of tracking short-term market fluctuations to make money. Every rise and fall in the market can signal where the market is headed next, providing clues to profitable trades.
Considering the above factors, the choice between trading and investing comes down to what you expect, an active or a passive income?
Risk Appetite
Both investing and trading carry risk. However, investors can overcome short-term volatility as the project's merit should help it tide over market fluctuations.
On the other hand, trading requires a good read of market volatility. You need to make trades after studying multiple signals and technical indicators. Get your predictions wrong, and you could lose a lot of money in very little time. Get your projections right, and you can make bank very quickly.
Cost
Another factor you must consider is cost. Traders often make multiple transactions, resulting in higher fees paid to a platform. However, if your trades are profitable, you should be able to cover these transaction fees with ease. However, investing involves fewer charges as you make less frequent transactions.
Conclusion
In the cryptosphere, there are excellent traders and excellent investors too. But traders and investors who get lucky repeatedly? They do not exist. This is because both strategies require time and effort to pull off. So, no matter which one you choose, rooting your activity in deep research and market understanding is essential. You can buy your favourite crypto on WazirX.
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