What is Trading? Definition, How it Works, and the Difference from Investment

Bittime - You must already know the term "trading" right? From stocks to crypto assets, this activity attracts the interest of many people who want to gain profits through price fluctuations. So, this article will discuss what trading is, from its definition to how it works. Keep watching, OK!

Even though it looks tempting, trading is not an activity that can be done without mature knowledge and strategy. For some people, trading can be a quick way to make money. 

Meanwhile, for others, this activity can be a source of major losses. Therefore, it is important to understand what trading is, how it works, and how it differs from investing.

What is Trading?

Trading is the activity of buying and selling assets, be they shares, currencies, commodities, or crypto assets, with the aim of profiting from price fluctuations. 

In the context of crypto assets, trading involves speculating on crypto price movements through a CFD (Contract for Difference) trading account or by buying and selling coins on a crypto exchange.

CFDs allow traders to bet on changes in the price of Bitcoin or other cryptos without having to own the underlying asset. For example, a trader can take a long (buy) position if he believes the price will rise, or short (sell) if he believes the price will fall. 

Both instruments use leverage, meaning traders only need to deposit a small portion of the total trade value to gain full exposure to the market. However, leverage also increases the potential for profits and losses.

Additionally, crypto options are used by investors to reduce risk or increase market exposure. This option is a derivative financial instrument whose value is derived from the price of another asset, in this case the underlying crypto asset.

How to Trade Crypto?

To start trading crypto, the first step is to have sufficient knowledge about the assets and technology involved. Here are some important steps in crypto trading:

1. Registering on a Crypto Exchange: 

The first step is to open an account on a crypto exchange like Bittime. This process involves sending personal information such as address, date of birth, identification number and email address as part of KYC (Know Your Customer) requirements.

2. Funding Account: 

After registering, you need to connect your bank account to fund your trading account. Most crypto exchanges accept bank deposits via debit cards and wire transfers. 

Wire transfers are usually the most cost-effective way to top up your account.

3. Choosing Crypto to Invest: 

Most crypto traders invest their money in Bitcoin and Ether because of their more predictable price movements compared to smaller altcoins. 

However, some traders also invest in altcoins which are riskier but have greater profit potential.

4. Start Trading: 

KYou can use automated trading software like Coinrule for crypto trading strategies. This crypto trading bot is designed to provide maximum returns based on your investment goals. 

You can make money quickly, save your coins, or diversify your portfolio.

5. Storing Your Crypto: 

If you actively trade, you need to store your funds on an exchange for easy access. However, if you are buying crypto for the medium or long term, you should buy a crypto wallet for better security. 

Crypto wallets can be software wallets or hardware wallets, with hardware wallets providing the highest protection because they store crypto offline.

What is the Difference Between Trading and Investing?

Even though they look similar, trading and investing have fundamental differences in approach and goals. Here are some of the main differences:

1. Goals and Timeframe: 

   - Investment: Aim to build wealth gradually over the long term by buying and holding assets such as stocks, mutual funds, bonds, and ETFs. Investments often aim for large returns over long periods of time, relying on dividends, interest and growth in asset value.

  - Trading: Aim to profit from price fluctuations over shorter time frames, ranging from a few minutes to several months. Traders look for small, more frequent profits than investors who typically chase stable annual profits.

2. Analysis and Strategy: 

  - Investment: Focus more on fundamental analysis such as price to earnings ratio and management projections. Investors often take a passive approach by buying and holding assets for long periods of time.

   - Trading: Rely on technical analysis to find high probability trading setups, using tools such as moving averages and stochastic oscillators. Traders actively monitor the market to make quick decisions based on price changes.

3. Risk Management: 

   - Investment: Usually more patient and ready to withstand short-term market fluctuations in the hope that prices will recover in the long term.

   - Trading: Using stop-loss orders to limit losses at predetermined price levels, and often taking short positions to profit from falling prices.

4. Transaction Frequency: 

   - Investment: Transactions are less frequent and carried out over a longer period of time.

  - Trading: Transactions are more frequent and over shorter time periods, ranging from minutes to several months.

Conclusion

Trading requires deeper knowledge and analytical skills as well as the ability to make quick decisions. Meanwhile, investment places more emphasis on fundamental analysis and patience in holding assets for long periods of time. 

Understanding what trading is and how it differs from investing can help you when you enter the crypto market or other assets. Hopefully this article about what trading is can be useful, OK?

How to Buy Crypto on Bittime

You can buy and sell crypto assets easily and safely via Bittime. Bittime is one of the best crypto applications in Indonesia which is officially registered with Bappebti. 

To be able to buy crypto assets on Bittime, make sure you have registered and completed identity verification. Apart from that, also ensure you have sufficient balance by depositing some funds into your wallet. For your information, the minimum purchase of assets on Bittime is IDR 10,000. After that, you can purchase crypto assets in the application. Study Complete Guide How to Buy Crypto on Bittime. 

Monitor graphic movement of Bitcoin (BTC) price, Ethereum (ETH), Solana (SOL), and other cryptos to find out today's crypto market trends in real-time on Bittime.