Hodling Vs Trading: The Best Approach For The New Crypto Enthusiast
5 mins read
4 mths ago
Cryptocurrencies have proven to be a viable asset, so persons interested in growing their finances have invested in them with the hope of making a profit. In fact, despite hurdles placed by the Central Bank of Nigeria that may have discouraged many from pursuing cryptocurrencies, Nigerians are trouping into the crypto space.
There’s no doubt that you can earn significant profits from cryptocurrencies. There are several success stories of crypto millionaires on the internet to prove that. Yet, the path to making the best profit for a crypto enthusiast or newbie might seem muddled up as they decide which is their best alternative: hodl or trade.
As an investor with minimal experience in trading, it might become even more confusing with the amount of unsolicited “professional advice” all over the internet. Some encourage you to hodl as it is the best alternative, while others tell you trading is your best bet. In this article, we’ll be delving deep into what crypto hodling and trading entail to help you select the best approach that works for you.
What is Hodling?
HODL is an acronym for hold on for dear life. It is a long term investment strategy that involves buying and holding on to a crypto asset with the expectation that its price will increase over time.
Pros of Hodling
- Little or no effort: You don’t need skills to hodl.
- Allows for Dollar Cost average: You can spread your investment over time and purchase more of the asset without pressure.
- Less risky and will enable you to save your funds in crypto to avoid Naira’s inflation.
Cons of Hodling
- You need to conduct extensive research to ensure that the asset you purchase is viable.
- You may miss out on significant gains that come with trading, and at the same time, you are not sure when to take a profit. Hodlers are not always sure of the right time to sell. They may sell too early, and the price skyrockets or they sell late, and the price dips.
- It’s a long term investment which leaves your funds tied up for a long time. You may miss out on other investment opportunities as you don’t have funds at your disposal.
- It requires patience and emotional control to continue hodling an asset with a bearish market.
What is Trading?
Crypto trading is buying and selling crypto assets within short intervals to earn some profit. Crypto traders buy or sell cryptocurrencies based on their perception of when the price will go up or down. The idea is simple, buy low, sell high.
Pros of Trading
- You can earn significantly from price fluctuations, providing a source of daily income.
- You can take on trading as a full-time job, become more active in the crypto space and enjoy the flexibility of being your own boss.
Cons of Trading
- Time-consuming: You might be hooked to your mobile all day watching the market charts and trends.
- Higher risk: You can record significant losses from trading as you don’t control how the market moves.
- Emotional control: You need to be able to manage your emotions when making trades as prices of cryptocurrencies may fluctuate in a rapid, volatile market. You need to be able to make rational decisions, or you may end up with a significant loss.
Hodling vs Trading: Which is the better alternative?
Although Hodling and trading have their merits, they also have their cons. A person who hodls has to keep in mind the market's extreme volatility and be in emotional control during a bearish market. Several people sell off their tokens during a bearish market out of fear which often incurs a loss.
Indeed, traders do not have to worry much about the utility of a coin like crypto holders as they can quickly enter and exit a market, but at the same time, they could enter and get stuck in a bad trade. In fact, several people have tagged crypto trading as a gamble.
In the end, the decision to either hodl or trade boils down to how much risk you are willing to take or expose your funds. Trading may be for you if you can tell the market apart and effectively read the market to trade your crypto coins. But if you have no experience with trading, you don’t have to be pressured into trading; you can start with hodling.
Experts recommend that an inexperienced crypto enthusiast begins with Hodling. This will allow you time to understand the market before you start trading. There is also the option to combine strategies by hodling some crypto while trading the rest.
Tips for Crypto Newbies
Regardless of your decision to either hodl or trade, here are some tips to help you in your crypto journey.
- Know your market: Proper research and understanding of the crypto space will help guide your investment choice. It will better inform you of the best time to enter or exit a market.
- Exercise patience and do not be swayed by emotions: Emotions can be a huge stumbling block if you succumb to them and allow them to guide your investment decisions. Whether you decide to hodl or trade, being in control of your emotions will help you make the best profit.
Also, be sure to invest only what you can afford to lose; you won't be easily emotionally swayed by the fear of a loss.
- Predefine your crypto targets: You should know your target profit either as a hodler or trader before starting your crypto adventure. An investment plan will guide you on when to enter or exit a market.
There is no right answer to the best approach for crypto enthusiasts. Hodling and trading both have their merits and disadvantages. The best approach depends on you and the level of risk you are willing to expose your funds. If you are interested in trading, you can take a percentage of your crypto holdings and start with it. As you get more versed in the crypto space, you can increase your trading portfolio.
You can also decide to combine both investment strategies and hodl a certain percentage of both to fit your risk profile. Regardless of the strategy you take, you must do your own research. Do not be pressured into a trade or investing in a crypto token without adequate research.
As a crypto newbie, you need to proceed cautiously. The decision to either trade or hodl is up to you, and hopefully, these will help you decide which approach is best for you. To get started on your crypto journey, you can buy bitcoin on Yellow Card, which has the best rates and the most advanced security for your crypto tokens for either you decide to hodl or trade bitcoin.
Happy HODLing or trading!
Disclaimer: This article is meant to provide general guidance and understanding of cryptocurrency and the Blockchain network. It’s not an exhaustive list and should not be taken as financial advice. Yellow Card Academy is not responsible for your investment decisions.