As discussed in Class 1 Module 3.0.0, there are basically three ways to invest in cryptos:
- Mining
- Hodling
- Trading
Classes 2, 3, and 4 deal on the three main forms of Mining while Class 5 discusses Hodling. In this Class, you will be introduced to the basic techniques in Crypto Trading.
Module 1.0.0. Differences Between Hodling and Trading
Mining, which is the process of generating new coins directly from a blockchain, is quite simple to differentiate from Holding and Trading. However, many investors are confused between Hodling and Trading.
Hodling is simply the acquiring of cryptos and then keeping them for a while to sell for a profit. On the other hand, crypto trading is actively buying and selling cryptos in real time.
The key words here are “actively” and “real time.”
(1). Trading – An Active Process
Whereas hodling involves keeping the cryptos for some time before selling, trading is the process of actively searching for an avenue to sell off the crypto at a profit without the patience of waiting.
A Hodler is like a merchant who bought some goods and stored them up in his warehouse, waiting for a season when it is most profitable to sell the goods. On the other hand, a trader is like a businessperson who buys goods and then actively looks for a willing customer he can sell the goods to at a profit right away.
(2). Trading – In Real Time
Another major thing that differentiates Trading from Hodling is that Trading occurs in real time while Hodling does not. Real Time refers to “something happening now or something that is being transmitted or transacted over the exact number of minutes, seconds or hours with other persons.”
When you trade, you are transacting with another person within the specific time frame. However, in Hodling, you are not transacting in real time, rather you wait patiently until you get your desired results before disposing your cryptos.
In other words, trading may take place over one second, minutes, or even months but it is still not hodling because the crypto trader does his transaction actively and is, in real time, searching for buyers and traders for his trade.
Therefore, to effectively trade and make profits, a trader will not just put up a trade and hope for the best. He engages a number of indicators to assist him in making a decision on how to place his trade and when to close it.
On the other hand, hodling does not require any trading indicator. In hodling, once you have selected the crypto, all you need to do is to keep the crypto in a wallet and wait for the price to appreciate before you sell it.
Table summarizes the differences between Crypto Trading and Hodling.
