At this moment in time tons of people are thinking about the smart ways to invest, to secure their money is circulating. In these challenging financial times, this is important. As for what people turn to invest and trade most in, the answer is cryptocurrencies and stocks. It’s easy for those with experience to decide, invest, and make it successful, but for beginners, it is hard to decide on which of these two are a better option?
This article will try and give the important information, in order for you to be able and decide on your own. Let’s start with getting familiar with crypto trading…
We have all heard hundreds of stories about life-changing digital currencies. Anonymous traders on social networks cover us with stories of turning $ 1,000 into millions in just a few months, but what does it actually look like in real life and what should all beginners know?
To the outside observer, this seems like an easy and safe way to get rich quickly. They leave their jobs to become “professional traders,” before they even learn the basics of trading and risk management. We all know how stories like this end up.
It’s hard to be a trader in any market because 95% of all traders never succeed, and most realize in just a few months that they will never even succeed. They usually go bankrupt or have much worse results than the classic investors who invest and then let the investment grow. Contrary to popular belief, the crypto market is, for various reasons, the most difficult for beginners. Why so?
Because it’s a casino without working hours.
Digital coins operate in a market where trading takes place at any time of the day, no matter where you are. Exchanges take place online, which means you don’t have to physically visit the market to buy coins. As explained by Merca2 a market working 24/7 gives traders the feeling that they always have to trade and keep up to date. This causes huge fatigue and FOMO (fear of disappearance), especially for more emotional traders. No one can effectively monitor a market that is constantly available, and new traders find this particularly difficult. This often destroys their private lives, especially their finances.
The bottom line, an inexperienced person is much more likely to go bankrupt if he buys a cryptocurrency than if he randomly buys one of the stocks. The stakes are far higher! Cryptocurrencies are not always the safest investments and should be only a small part of someone’s entire portfolio. Also, traders should never choose between profit and proper risk management.
Risk management can be boring, but it seems to be the most important skill needed to make a profit. Understanding how much to risk in a trade and how to properly balance a portfolio is exponentially more important than entry and exit. It takes a long time to learn this, and most new retailers go bankrupt before they realize this risk.
Most people, especially beginners would be much better off slowly investing a small percentage of their entire portfolio in cryptocurrencies, especially bitcoin. Don’t be fooled by various social media profiles and strangers who claim the opposite, because trading these assets is really difficult.
What about the stock market?
It’s a slightly different story here. The place where it all happens is the World Stock Exchange. It’s the largest financial market in which millions of people around the world trade online, via their computers or mobile phones. Having the possibility to trade on various devices, with so many options, surely is an advantage of living in the world as it is today
One thing the stock market has in common with crypto is the fact it is open for trading 24 hours a day, 5 days a week. However, in this market, the price is what is being traded. Not the actual currency.
Yes exactly, the price. You do not physically trade stocks on the world stock market, but their price. This gives you the opportunity, unlike other markets, to trade when the price rises, but also when the price falls, by simply opening a buying or selling position. And how exactly is it traded?
Simple. For example, if the current price of shares is $ 185, and we expect the price to rise due to, say, a new product model, which people evaluate positively, then we open a buying position on the trading platform by clicking BUY. If the price rises above $ 185, we have secured a potential profit, and if the price falls below $ 185, we have suffered a loss.
On the other hand, if we expect the price to fall below $ 185, then we open a sell position by clicking SELL. If the price falls below $ 185, we have secured a potential profit, and if the price rises above $ 185, we have suffered a loss.
So, what is necessary for the beginner trader to become successful?
Unlike in digital currencies case, one can be successful with stocks having only basic knowledge. You don’t have to be a financial expert to trade them, but you certainly need to know technical things like how to access a trading platform, how to choose the stock you want to trade, how to open a trading position, and finally how to set the desired profit and protect yourself from loss.
As you can see, trading in both cases requires some knowledge, although crypto is assessed as the harder option. However, do not be discouraged by this fact. If it feels interesting and right to you, you should go ahead and invest. Just make sure you have attended at least one seminar, or webinar on this topic, to familiarize yourself with the basics. And, start small, as we said earlier. Never invest the amount you’re not ready to lose if the prices go low. Always keep in mind the volatility factor.