Before we dive deep into the topic, we want to explain what Bitcoin trading is and how it varies from Bitcoin investing.
If individuals invest in Bitcoin or in cryptocurrency trading, it usually implies they are for the long run. In other terms, they assume that, because of the ups and downs that arise along the road, the price would eventually increase. In Bitcoin, individuals typically invest because they trust in the technology, philosophy, or team behind the currency.
In the long run, Bitcoin holders prefer to HODL the currency (HODL is a common phrase in the Bitcoin culture that was initially born in an old 2013 article in the BitcoinTalk forum from a mistake of the word ‘hold.’
On the other side, cryptocurrency trading investors purchase and sell Bitcoin in the short run if they believe it is feasible to make a buck. Traders use Bitcoin as a profit-making mechanism, unlike consumers. Often they don’t care to research the technologies or philosophy behind the commodity they’re selling.
As for the rapid increase of Bitcoin trading interest, there are a few explanations for that.
First, Bitcoin is very unpredictable. In other words, if you plan to predict the price right, you will make a good profit. Second, Bitcoin trading is available 24/7, unlike traditional markets.
There is an opening and closing period for other conventional markets, such as stocks and goods. You can purchase and sell whenever you please with Bitcoin.
Finally, without the need for lengthy identity-verification procedures, Bitcoin’s largely unregulated landscape allows it relatively easy to begin trading.
Although all traders want the same thing, to get it, they practice various approaches. Let’s look at some examples of common forms of trading:
This approach means carrying out several transactions and attempting to benefit from short-term market fluctuations throughout the day. Day traders waste a lot of hours looking at computer screens, and by the end of each day, they typically only shut all their trades.
Recently, this day-trading technique is becoming popular. Scalping aims to make large gains on minor price shifts, and it is sometimes referred to as “picking up pennies in front of a steamroller.”
Scalping relies on incredibly short-term trading, as it is focused on the premise that generating minor gains continuously reduces costs and provides traders with rewards. Scalpers will create thousands of transactions in one day, or sometimes hundreds.
The inevitable “swing” of the stock cycles attempts to take advantage of this form of trading. Swing traders try to catch the beginning of a particular price trend and then join the trade. They hang on till the movement dies down, then take the benefit.
Without actively watching their computer screen, swing traders attempt to see the larger picture. For example, switching traders will open a trading account and leave it open for weeks or even months before they achieve the target outcome.