This discussion has been and still is much debated across board and in this topic we shall be looking at what makes Crypto-Trading fun or not and what makes Crypto-Hodling fun or not.
What is Cryptocurrency Trading? Cryptocurrency trading is defined as the buying and selling of digital assets, commonly referred to as cryptocurrencies, with the goal of making a profit by taking advantage of price fluctuations in the market by executing trades and capitalizing on short-term market movements.
What is Cryptocurrency Holding? Cryptocurrency holding, commonly referred to as “HODLing,” is when a user acquires digital assets with the intention of holding them long term through its various circles of volatility and swings.
➔Quick fact: The word HODL originated from a post on the Bitcointalk forum in December 2013 when a user by the name GameKyuubi made a post with the title, “I AM HODLING.” He went on to explain that he was deciding to hold his Bitcoins because he was a bad trader. (Was he also a bad speller?) Since then, we all have been using that word devotedly and I will be using it in this topic.
The decision between trading and hodling cryptocurrency depends on individual preferences, investment target/goals, risk tolerance and time commitment. So, let us get into the discussion and see how far we get. Here’s a breakdown of both approaches:
Trading Cryptocurrency: There are various types of trading that one can engage in.
★Day Trading: this Involves opening and closing positions within a single trading day.
★Swing Trading: This is the type of trading where the trader holds a position for a few days to weeks. This allows the trader to take advantage of short-to-medium-term price trends.
★Position Trading: This is a trade taken based on long-term trends and
fundamentals.
a. Targets/Goal: Traders choose their term limit for trading, either long or short term. Most traders aim to profit from short-term price fluctuations and market movements and they engage in technical analysis to get their trades planned and executed with chosen trading strategies, and they actively buy and sell assets.
b. Risks: Profitable traders understand the risk involved in trading either for the short term or long term. Short-term price movements are and can be unpredictable. A good understanding of market dynamics is required to be able to make profits during these times.
c. Skills and Knowledge: This means that the trader must
● Technical analysi: A successful trader must have a good understanding of and usage of technical analysis to make informed decisions based on price charts, indicators and chart patterns.
● Risk Management: Successful traders have a good understanding of risk
management and they are known to always use stop-loss orders to limit potential losses.
d. Time Commitment: Depending on your trading style, you are required to have a time commitment in place to be able to stay profitable. Active traders are known to continuously monitor the markets, do technical analysis and have a quick decision making style.
e. Emotional Discipline: Traders have emotional discipline as a critical must have tool. Decision making during trading can be wrongly influenced by fear and greed. Successful traders have and follow a strict trading plan.
Holding Cryptocurrency (Long-Term Investment):
a. Goal: The goal of the Holder is usually long term and non else.
●Long-Term Growth: The “HODLer,” aims for long-term capital appreciation. They believe in the potential growth of the cryptocurrency over an extended period.
b. Time Commitment: Holding assets over a long term period doesn’t require that serious a time commitment. There is less active involvement than in trading. Periodic reviews and adjustments are needed with no constant monitoring.
c. Skills and Knowledge:
●Fundamental Analysis: Holders often focus on the fundamental value and long-term potential of the cryptocurrency rather than short-term price movements.
d. Risks: During market volatility, the price of the said asset may experience significant volatility which will usually keep the portfolio in negative. These traders hold through the highs and lows and the period has been known to extend to years for some.
e. Emotional Discipline: Emotional discipline is important and crucial for long-term investors. Market volatility and price declines can test an investor’s patience and conviction. Lots of people have failed to be hodlers because they fail to be disciplined through the hodl period.
Considerations to make before choosing either trading of cryptocurrency or holding:
Market Conditions: To trade or hodl, you must consider current market conditions. Bull and bear markets may favor trading, while holding may be affected negatively during bear markets.
Risk Tolerance: As a trader, you are often exposed to higher short-term risks which can deplete your capital. While holders despite experiencing volatility will continue to aim for long-term growth.
Time Horizon: Considering your investment time horizon and financial goals will help in your decision making. Trading is more short-term, while hodling is a long-term approach.
Knowledge and Experience: To be a trader, you must have a good understanding of technical analysis and market dynamics. To hodl, you must have a straightforward approach based on the belief that the said project will do well and has long-term potential.
Finally, the decision between trading and hodling should be aligned with your financial goals, preferences, and risk appetite and tolerance. It’s also very crucial to conduct thorough research and stay informed about market trends regardless of the chosen strategy.
Fun fact, you can hodl and/or trade cryptocurrencies on the Roqqu app
