A lot of people want to get into cryptocurrency these days, and are asking “What is trading?” If you are one of those people who wants to know what is trading, you will learn the difference between buying and selling, and actually trading.
Buying and selling means that when you buy something, you own it, and when you sell it, you don’t own it anymore. Your profits or losses are based by taking the cost you paid for the item, and subtracting the amount you were paid for the item. If the number is positive, you earned money. If the number is negative, you lost money. That is not what is trading.
What is trading then, you want to know. Trading can be buying and selling, but you are not actually becoming the owner of the coin. When you trade, you can use different buying techniques where you make money even though the value of the coin drops. Or you can take a small investment and make a larger purchase.
What is trading, then? It is a better way to make more money, but it is also sometimes riskier. Let’s talk about how it works.
Day trading, which is part of what is trading, is where you are out there every day, trying to earn a set level of profit. You might make hundreds of trades in a single day, buying and selling as you try to earn predetermined levels of profits from your trades while controlling your losses, so that even if a coin does not perform the way you expect, you will be protected and will not lose so much money.
Leveraging the Market
One tool people who want to know what is trading should learn about is leveraging. When you go to leverage a coin, you are basically borrowing money from a broker to make a trade. Let’s say you have $1,000 to invest, but you believe really strongly that a coin is about to increase in value significantly. It is a shame to only invest the $1,000 that you have, and it would be much better to invest $10,000.
For someone who knows what is trading, they can use leverage, where they invest their $1,000, and borrow $9,000 from the broker. Let’s say the coin we are talking about here is worth $1. With leverage, you now own 10,000 coins, but you have only invested $1,000 of your own money. If the coin goes up to be worth $3, and you sell it, your 10,000 coins will be worth $30,000. You pay back the broker the $9,000 that you borrowed, you have turned your $1,000 investment into $21,000.
Shorting the Market
Let’s say you believe that the market is going to drop. There is a futures market for Bitcoin and other cryptocurrencies. As far as what is trading Bitcoin, you can sell a future contract, which is essentially a way to make money trading Bitcoin when it drops in value, and it will earn you money.
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