Cryptocurrencies can be traded for many options from buying food articles to paying for services and many more. They can be exchanged for other cryptocurrencies, fiat currencies or even the precious metals like gold and silver. If traded correctly the cryptocurrency trading can make a substantial profit. There can be various techniques used in trading cryptocurrencies, but which one the perfect one? In this article, we will focus on the advantages of buy and hold technique with regards to cryptocurrency trading.
Advantages of the Buy and Hold technique:
1) Wait and Watch: Traders who choose to buy and hold the cryptocurrencies for a longer time period get a chance to observe the market changes without panicking about the current situation and selling out the assets in an attempt of preventing any losses. The cryptocurrency market is very volatile causing many ups and downs in the cryptocurrency values. Sometimes the instability might last for small durations and traders might regret their decisions of selling their assets. So sometimes buy and hold can turn out in favor of the long-term traders.
2) Reduced transaction cost: Every trade transaction costs money, hence the more transaction a trader does the more cost he has to pay. When you are buying and holding assets, you do fewer transactions compared to traders who are in and out of the market almost every day or every few days. The total cost of all the transactions sometimes can total up to a significant amount affecting the overall profits done in these transactions.
3) Less stressful: Trading is a stressful task. Traders have to keep a constant watch on the market changes. Those who are trading in short-term or medium-term especially need to watch the market for every small change. This can put a lot of stress on the traders. Long-term trading is also stressful but less compared to the short-term and medium-term trading.
4) Less time consuming: Monitoring the market status needs a lot of time investment. The short-term and medium-term traders need to monitor each and every market change and also keep tracking the charts frequently, also need to spend time in doing the transactions. This can use up a lot of time. The long-term traders also need to monitor the market but they can spend a little less time and only check the charts to understand the market position.
5) No perfect timing to enter: Traders who plan to buy and hold the assets do not have to specifically look for the perfect opportunity to enter the market. They know that the asset values are going to change over the time while they hold them. Long-term traders don’t often wait for major price fall in the dominant market trend as they are aware of the possibility to miss the chance to get in the trade position they are waiting for.
6) Look for other options: Traders can choose to explore other trading options while they are waiting for their long-term investments to bring results. Investing in various short-term and medium-term assets at the same time cannot be a beneficial choice always. Traders can choose to invest in a few long-term and other short-term assets to maintain a balance in their portfolio.