In this article, we discuss two of the methods that even beginners can do when it comes to crypto investing: holding and spot trading.
This is not financial advice. The article aims to educate the readers about the different methods of trading crypto. Do due diligence in researching crypto before investing in them.
What is Holding or Hodling?
Holding is a trading strategy that is basically buying cryptocurrencies and leaving it in the crypto wallet for a period of time, often associated with not selling for months or even years without selling.
A Crypto linggo HODL, a misspelled word that became an acronym for “Hold on for dear life” which describes what holding (HODLing) really is. This is because of the volatility of the market which can be very risky especially when the market drops drastically.
What is Spot Trading?
Spot trading is the regular buying and selling (trading) cryptocurrencies and/or fiat on an exchange platform.
For instance, the trader has Bitcoin (BTC) and he wanted to sell it on the market for a certain amount. The trader needs to pair it with any cryptocurrency available like Ether (ETH), a stablecoin like Tether (USDT) or a fiat like the US Dollar (if available on the platform). The trading principle of “Buy low, sell high” applies to this. The trader will put a limit to where he wants to sell his asset into the market. As soon as it hits the limit, the crypto asset will be converted to where it was paired with. As opposed to “leverage trading” where the user gets “liquidated” when the trade does not go their way, in spot trading, the investor loses or gains the moment they sell.
What is the Difference between Holding and Spot Trading?
Holding is where the trader has to be patient enough to wait for the market to trend up until he decides to sell it without monitoring much of the movement of the market. This method is for those who are willing to ignore market cycles but it could be very rewarding when the market reaches its all-time high (ATH).
While for Spot Trading, the trader carefully examines the movement of the market and uses the chart to see the indicators for a good entry to enter into trade and sell to secure his asset. Spot Trading is one of the tools Day Traders and Scalp Traders use to gain profit.
Both holding and spot trading are useful for beginners who wanted to study the volatility of the market. But each has its pros and cons. It really depends on the trader on which method suits his level of taking risks and willingness to expose himself into the very dynamic movement of the market. But the best thing to do is learn how to read the charts and analyze the market both fundamentally and technically when doing such methods. Without this knowledge, holding and trading cryptocurrencies will just be a way of gambling and hoping on chances of getting profits.
This article is published on BitPinas: Spot Trading vs Holding: What’s the Difference?
Disclaimer: BitPinas articles and its external content are not financial advice. The team serves to deliver independent, unbiased news to provide information for Philippine-crypto and beyond.