Due to the constant increase in demand and adoption of cryptocurrency and blockchain technology, the cryptocurrency ecosystem has experienced tremendous growth in recent years. This growth led to a Trillion and a Bitcoin Dominance of about 44.51%.
The tremendous growth in the market capitalization of the crypto industry tends to give crypto traders and investors the impetus to navigate through the market ramifications. When they navigate through the market, market trends are usually noticed by traders and investors. With the help of market trends, the movements of money to different places in the industry can be easily detected. Cryptocurrency traders and investors always put money in the direction of the market movement where it is favorable.
To be a successful crypto trader and an investor, there are certain things that we will be looking at in this article. Some of these include; the difference between a crypto trader and an investor, different kinds of crypto traders, understanding technical and fundamental analysis and how they help in trading cryptocurrencies, and tips and tricks for successful trading.
Difference Between Crypto Investor And Crypto Trader Are;
As a novice coming into the crypto industry, it is important to know your area of participation; whether you are coming as an investor or as a trader. Hence, in this part, we will be studying the differences between a crypto investor and a crypto trader.
Cryptocurrency investment is sometimes referred to as HOLDING and while a cryptocurrency investor is referred to HOLDLER.
Crypto investor: this is a person who buys crypto assets and holds them over a long period of time be it a year or years in the expectation that the price of the assets will appreciate with time. Crypto investors usually invest in these assets at their discount prices as the prices increase over time. Usually, they invest in coins or assets with strong fundamentals.
Cryptocurrency trading: these involve the buying and selling of cryptocurrencies in a short while which is based on price prediction at good entry and exit points. The best entries and exit prices of a trade can be sighted using technical analysis. At times, traders follow the crypto market news to use technical indicators to determine the right entry and exit point for a particular trade.
The explanations made in the above paragraphs differentiate “who is a crypto trader and an investor”. In the substituents paragraph, we will be considering the different kinds of crypto traders.
Examples Of Different Kinds Of Trading Are;
Scalper Traders: there are traders that buy and sell coins on a short price movement. It’s one of the fastest-paced kinds of trading. A scalper trader capitalizes on an increase in trading volume and the trade can take up to a second, minutes, or an hour.
Swing Traders: they are traders that take the opportunity in the short-term swing price of a cryptocurrency. Swing trade time duration can be a full day or takes a week and some may even take a month. Traders usually predict the price of the coin during these durations using technical analysis.
Day Trader: this kind of trader usually holds a trade within a day and they discourage overnight position trading. The durations for each trade range from minutes to hours. Day traders take advantage of daily price movement for profits.
Momentum Trader: in momentum trading, traders buy crypto low in an uptrend direction and sell off once the price breaks the momentum. This kind of trade can hold for an hour, week, or month to enter or exit.
Understanding Technical And Fundamental Analysis
Technical and fundamental analysis is what crypto traders used in predicting the prices and movements of the market. Sometimes, fundamental analysts used it to detect the entry price of a particular coin when making an investment. Therefore, knowing how these two analysis methods work as a trader and an investor is very important. Below, we will be making brief explanations of what both analyses entail.
Technical analysis: it is the kind of analysis that is used in examining past historical trading activities and chart patterns of digital assets to figure out trends and trading opportunities in the market. It helps to predict the future price movement of an asset by analyzing its past price action and volume. The history of technical analysis can be traced down to Charles Dow who is the founder of Wall Street.
The technical analysis comprises different core elements which include;
Technical Indicator: it identifies the current price position based on specific metrics and on the other hand, it helps to observe the possible price movement of an asset in a more predictive way. Examples of top technical indicators are; moving average, relative strength index, Bollinger bands, pivots and Fibonacci, etc
Price action: the future price of an asset can be predicted using volume charts and price fluctuation on this core element of technical analysis. Examples of price action patterns are: trend and momentum also we have candlesticks patterns.
Fundamental Analysis: this is a method used by crypto investors when making investments to examine certain factors about the crypto such as the team of the coin, targeted market audience, etc to determine the future value of the asset.
Some of the criteria a fundamental analyst used to determine the future price of a coin while making crypto investments include;
- Whitepaper of the project,
- The team background,
- The market adoption rate,
- Market capitalization,
- Market capitalization,
- Use case of the project etc
How Fundamental And Technical Analysis Help In Successful Cryptocurrency Trading
While technical analysis enables traders to access the market through quantitative data analysis, fundamental analysis on the other hand focus on the macro criteria of a crypto asset to predict the future price of the project.
To be a successful crypto trader and investor, it’s important to know both fundamental and technical analysis. Fundamental analysis helps you know where and when money can move into the market but technical helps to detect the right time to enter and exit the market either in a long time or in a short time. By knowing when money flows into the market via crypto news or considering important criteria of a project through fundamental analysis and knowing the right time to enter and exit the market through technical analysis, it helps trader and investors to minimize their losses and hence making them a successful traders or an investor.
Tips And Tricks To Become A Successful Trader And An Investor
To be a successful trader and investor, it is important to follow certain strategies or tips that will enhance your growth as a trader or an investor. In this part of the article, we will be considering what will make one a successful investor or trader.
Fundamental And Technical Analysis: having known what technical and fundamental analysis is all about from the above paragraphs, it’s very important to analyze the market fundamentally or technically while trading or making an investment.
Setting Stop-Loss and Take-Profits On Your Trades: by setting stop-loss on your trades, your trades are secure as it helps to minimize your loss when a trade should go against you. In the opposite way, if a trade should go in your direction the take-profits helps to take off your profits from the market when it reaches the price set for it. As a trader, it is important to put them on your trades.
Proper Risk Management: managing your risk involves setting out the amount of margin or capital for trading or making investments. This help to reduce the loss of money to the market if the analysis is altered.
Dollar-Cost Averaging: respective to the market condition, investors or traders put a small amount of margin on an asset at a different price interval. For example, a trader who has $1000 for investing in an asset can split the money into two and invest it at different price ranges. This tip helps traders and investors to avoid FOMO (FEAR OF MISSING OUT) in most market conditions.
The cryptocurrency market is a complex space. It is essential to define your niche before going into the industry whether as a trader or as an investor. Also, it is essential to know the key differences between a crypto trader and an investor. In the crypto market, we have different kinds of traders such as; swing traders, scalpers, day, etc.
As a trader or an investor in the crypto space, it is very good to understand what technical and fundamental analyses are before embarking on trades or investing. While investing, always check out for the coin developer background, whitepaper, market capitalization, use cases, etc.
To be a successful trader and an investor, endeavor to manage your risks properly while investing or trading, always use stop-loss and take profits, analyze the market, etc.