Investing and trading allow you to exchange a certain amount of risk for a higher financial reward, instead of working for money directly. If you invest with the right knowledge behind the decision, the rewards can be significantly higher, and this is where our Smartvestments series can help you.
Know the difference between Trading and Investing
Stocks or cryptocurrency trading focuses on the day-to-day fluctuations in prices. However, investing can sometimes reveal more tactical actions available than trading.
For example, when you buy and hold assets targeting capital growth over a longer timeframe span than the objective of a short-term trader, you protect yourself against the violent volatility of the markets.
You can also get exposed to potential passive gains like dividends or stakes collected on your asset.
Traders vs Investors
People who buy and sell assets within a few days, weeks, months, or years are called traders. However, investors take positions for a more extended period. As a result, they make far fewer moves than traders and expect a higher return in time, but with less risk and effort.
? A crypto trading market is where cryptocurrencies are bought and sold frequently on a lower timeframe to make a quick profit.
? When market participants choose to follow the higher timeframes of an asset evolution and are willing to buy and hold it for a longer term — that’s an investments market.
For example, the futures markets on a cryptocurrency exchange are dedicated to traders. But, at the same time, the spot market on a cryptocurrency exchange can be used by investors alike to make their capital placements.
When you’re investing, you’re going long-term.
The time factor is a big difference between traders’ actions and investors’ views. Also, their interest in different aspects of a company’s financials differs.
Traders like volatility. They make money from up and down waves that an asset creates in its market structure. Investors study companies’ long-term viability and the actual pricing rather than their daily stock fluctuation in prices.
Smart trading
Trading is a short-term play. Traders aim for many winning trades executed recurrently. Things to know for minimizing the risks of trading:
● Work on a trading plan
● Do everything you can to follow it
● Find your risk aversion — your maximum Stop-Loss limit amount that you are okay with losing on a single trade
● Use a trading journal to analyze your execution
● Be in the zone then trading
● Don’t forget about taxes
Smart investing
Investing strategies target achieving long-term wealth by compounding the capital. What you need to know:
● Make your investment plan. What is your objective?
● Have patience — your investments are a long term play
?Similar to a trader, the investor’s goal is to capitalize on markets’ opportunities, but they approach the needs with different strategies.
Longer timeframes and higher returns are the things that investors look for. Oppositely, traders usually execute more significant numbers of trades over a shorter period to compound their small but often wins.
Investors look to accumulate more assets and wealth. They buy and hold indexes or derivatives that have exposure to more investments. They often gain more significant returns by reinvesting the dividends and profits or by compounding their initial asset positions by purchasing more assets in a dollar-cost averaging strategy.
? Investing — long-term capital placement
? Trading — making fast decisions designed to maximize profits throughout a trading day, month, or quarter
A trader can make a significant gain by making many transactions that take advantage of the market’s fluctuations and volatility. An investor is more likely to don’t even care about volatility and ride out short-term losses.
Investors buy and hold onto their positions until they become profitable. They rarely exit the position on a loss. When it does happen, it’s usually for tax calculations purposes.
Traders get out fast of losing positions and look for other opportunities. They use Stop-Loss orders. Unlike investors, traders also use more Technical Analysis tools for scanning and reading the markets.
After newbies start trading, they will begin to prefer a specific style of trading and some particular instruments. So, the trader is developing expertise in stocks, options, futures, forex, cryptocurrency, or commodities. Some factors that will shape the trader’s style are personality traits, the available capital, personal risk tolerance, the amount of free time the trader has to dedicate to analyzing and executing, and even the level of trading experience in that specific market sector.
● The long-term approach to investing isn’t appealing for most people
● The investment account can also be grown without taking unnecessary risky actions on short-term moves. If your diversification is correct, that’s all you need for a simple, basic long term investment strategy
Avoiding the fear of missing out is a must when long-term investing.
When you’re hearing about the evolution of stocks or reading about the latest Bitcoin evolution, you can think that you are missing out, but that feeling needs to be put to sleep as soon as possible.
? Research has shown that investing is almost always the better choice for people who hope to achieve high returns on their investment portfolio in a macro timeframe.
How IXFI facilitates Smart Trading and Investments
Whether you want to trade or invest in crypto, you need to find an exchange platform that not only suits your needs but is also trustworthy and secure.
IXFI is a great choice because the key features the platform has been constructed around are a perfect fit for traders and investors alike, however new they are to the practice. Not only that but the IXFI Smartvestments series we are creating is meant to facilitate the whole process for you, by equipping you with the best knowledge and wisdom available.
So put your knowledge into practice, measure your risks accordingly and aim for higher financial rewards with IXFI.
Disclaimer: The content of this article is not investment advice and does not constitute an offer or solicitation to offer or recommendation of any investment product. It is for general purposes only and does not take into account your individual needs, investment objectives and specific financial and fiscal circumstances.
Although the material contained in this article was prepared based on information from public and private sources that IXFI believes to be reliable, no representation, warranty or undertaking, stated or implied, is given as to the accuracy of the information contained herein, and IXFI expressly disclaims any liability for the accuracy and completeness of the information contained in this article.
Investment involves risk; any ideas or strategies discussed herein should therefore not be undertaken by any individual without prior consultation with a financial professional for the purpose of assessing whether the ideas or strategies that are discussed are suitable to you based on your own personal financial and fiscal objectives, needs and risk tolerance. IXFI expressly disclaims any liability or loss incurred by any person who acts on the information, ideas or strategies discussed herein.
