In this post, we cover two strategies for investing in cryptocurrencies that even complete beginners may use: holding and spot trading.
This is not monetary advice. The article’s goal is to inform readers about the various cryptocurrency trading strategies. Before making any investment, do your homework and research them.
What exactly is Holding?
Holding is a trading technique that essentially entails purchasing cryptocurrencies and keeping them in the digital wallet for a while. This is frequently equated with not selling for months or even years.
Hold on for dear life, or HODLing, is the abbreviation for the crypto slang term HODL, which was originally written incorrectly. This is a result of market volatility, which can be quite risky, particularly when the market declines sharply.
Since then, HODL has evolved into a tactic utilized by those who freely admit they lack the expertise to engage in short-term trades like scalping, day trading, or swing trading. A similar term, BUIDL, which is frequently used by the cryptocurrency community to describe the various applications that are being developed inside the blockchain sector, was also inspired by the phrase “HODL.”
The regular buying and selling (trading) of cryptocurrencies and/or fiat on an exchange platform is known as spot trading.
Spot traders buy assets in the hopes that their value will increase in an effort to profit from the market. When the price rises, they can sell their assets for a profit on the spot market. The market can also be shorted by spot traders. Selling financial assets and buying more when the price drops is part of this process.
Spot trading is not merely restricted to one location. While most people will trade in spots on exchanges, you can also deal directly with other people without using a middleman. Over-the-counter trades are what these sales and purchases are referred to as. Every spot market has unique variations.
For example, the trader wished to sell his Bitcoin (BTC) for a specific sum on the market. It must be paired with any other cryptocurrency, such as Ether (ETH), a stable coin like Tether (USDT), or a fiat money, such as the USDT (if available on the platform). This follows the “Buy cheap, sell high” trading principle. The trader will specify a maximum price at which he wishes to sell an asset on the market. The cryptocurrency asset will be converted back to its original pairing as soon as it reaches the limit. In spot trading, the investor loses or profits at the time the trade closes, as opposed to “leverage trading,” when the user is “liquidated” when the trade does not go their way.
What separates holding from spot trading?
Holding requires the trader to have the patience to wait for the market to trend before he decides to sell it, without closely observing the market’s movement. When the market reaches its all-time high, this strategy, which is for people who are willing to overlook market cycles, could be very profitable (ATH).
While in spot trading, the trader closely observes market activity and uses the chart to spot the signs of a favorable entry to buy and sell in order to protect his asset. One tool Day Traders and Scalp Traders utilize to make money is spot trading.
For newcomers who wished to research market volatility, holding and spot trading are both beneficial. However, each has advantages and disadvantages. Which approach a trader chooses will largely rely on how much risk he is ready to take and how exposed he is to the market’s extremely volatile movement. The best course of action, however, is to learn how to read charts and evaluate the market using both fundamental and technical analysis. Without this information, owning and trading cryptocurrencies will only be a form of gambling and staking hope that one will make money.