Trading and investing may sound the same, but in reality, they are as
different as day and night. Trading refers to a short-term method of trying to
profit from buying and selling of bitcoins while investing refers to a long-
term strategy where a buyer will hold on to their bitcoins for a long time and
ride out any dips in the market price.
The Bitcoin Trader
The Bitcoin trader thrives on the exciting volatility of bitcoins. They’ll try to
time the market and buy bitcoins when the price dips and then they’ll wait
for the price to go up before they sell their bitcoins. Trading is a high-risk
game because you’re betting for the price to go up or down. Not everyone
can trade, however. The most successful traders are those who have
nerves of steel and can detach their emotions from their trades.
Traders don’t get scared of dips in the price because they are optimistic it’s
going to go up again, sooner or later. They are looking to maximize their
profits, too, so they’ll mostly invest a lump sum and buy at the lowest price
they can possibly go for, and then they’ll wait until the price is high enough
for them to make significant profit.
Trading takes a lot of guts. It takes a lot of thought and analysis. If you’re
an emotional type of person who gets physically sick with every dip in
bitcoin price, then you’re better off investing, and not trading, in bitcoins.
The Bitcoin Investor
Bitcoin investors are different from traders. They’re in it for the long haul.
They’re not looking to take advantage of short-term fluctuations in the
exchange rate. If the price goes down by hundreds or thousands of dollars,
they’re probably going to get worried, but they’re not going to pull out their
investment because they’ve already decided they’re going to hold it for the
next 10, 20 or 30 years.
A wise investor will practice the dollar cost averaging method to manage
risk. This means whether the price goes up or down, they’re going to buy
bitcoins and hold them. This strategy is perfect for long-term investments
as you’re essentially spreading the risk. Though profits may not be as
significant as short-term trading, the bitcoin investor probably sleeps easier
at night as they’re not worried how the charts are going to look like
tomorrow or the day after.
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