Unlike investing, the goal of cryptocurrency trading is not to hold a currency for the long term, but to actively work to profit from changes in the exchange rate. There are two common methods for evaluating data: fundamental and technical analysis.
How can we start trading?
Once we have decided that we want to do this, we first have to invest a lot of time and the amount of money we want to invest. Without the work invested, it is unlikely to be fruitful for us. We need to choose a stock exchange, connect our wallet to it to transfer the necessary funds, and then open our first coveted positions.
Should you invest or trade?
If you are in favour of the former, all you have to do is buy at a good entry point and wait. This mentality is usually typical of those who think in the long term. They forego short-term gains. They don’t want to ride small price movements, they just bet on the long-term trend.
Traders, on the other hand, think very differently. They want to make a profit on the price spreads that arise in the short term. Cryptocurrencies are very well suited for this purpose, because their high volatility means that if you find the right inputs and outputs, you can make a big profit.
Cryptocurrency trading methods
- The most intensive method is intraday trading. In this case, we close the opened positions on the same day. This way we try to make profits on the smallest movements of a few hours.
- A variation of this is called scalping, where we try to reduce our risk by realising quick profits immediately, even within a few minutes. This method can result in hundreds of trades a day.
- With the swingtrade method, on the other hand, we need to analyse the price movements. We should try to guess when the market will start to move up and then sell at the break. This can be a longer process. It can take months between when we buy and when we sell.
What is the difference between the different analyses?
The beauty of trading is that we try to predict the future. To do this, we can use different types of analysis. Let’s see what they are!
One is fundamental analysis, where we try to look at the asset from a slightly more distant perspective. We look at what government regulations we can expect, what news we hear about the industry. What is being said about the project behind the coin. Based on this, we try to piece together where prices will move in the medium to long term, or whether we can expect a rapid rise or fall in the near future.
With technical analysis, we look at the statistics. We analyse how exchange rates are moving. We try to identify trends, and from this we try to predict the probability of price changes. An important difference between the two is that in technical analysis we can also use automata, trading bots.
