The world of investments is a profitable but dangerous place where investors have to apply a risk management scheme to their operations. The cryptocurrency market is no different, and assets are predictable to a certain extent.
Many people ask: “Is crypto gambling or trading?” This article will explain the answer, and the big difference between both.
What makes trading any different than gambling?
Gamblers make an assumption to a given scenario and put their money to it, while traders study the market and wait for buying/selling opportunities according to pre-established levels. Technical analysis is a vital aspect for trading, and that is why traders analyze data from charts and fundamentals in order to place their money in the favorable side of odds.
The psychological element is also a protagonist in trading, as every successful trader must handle highly volatile emotions as the market moves. Gamblers are slave to their emotions because they depend on luck.
How do traders predict price movements?
Financial markets are cyclical and have resistance and support levels where prices break through or rebound depending on trading volume, trend behavior and fundamentals.
For example an asset took 2 years to go from $1 to $10, and in that run up, the price had a big crash when it got to $5 and $7 before hitting that $10 year high.
That means that $5 and $7 are heavy demand/supply zones for this asset and if it were to have another price crash, the odds of it dropping to those levels would increase. If the all-time high price of this asset is $10 and has not been able to break through for a while, there is probably a strong resistance holding the price back. If the $10 level does not hold, traders can sell the asset or place a short order to make money from this potential drop.
Crypto investments can be a gamble
The high volatility in the cryptocurrency market brings out the gambler in every trader, as some assets can grow 10 (or more) times its value in a matter of hours.
That makes people want to rush in and invest their money in the worst projects at the worst prices.
Crypto investments should be done through a deep study and research, thus basing your decision on facts and data rather than luck or feelings.