- What You’re Trading:
Crypto Trading: When you trade crypto, you’re dealing with digital currencies like Bitcoin or Ethereum. These are like online money, but they don’t exist physically.
Stocks Trading: When you trade stocks, you’re buying a piece of a big company. It’s like owning a small part of a business.
- When You Can Trade:
Crypto Trading: You can trade crypto anytime, day or night, because the crypto market never sleeps. It’s open 24/7, even on weekends.
Stocks Trading: Stocks have specific hours when you can trade, usually on weekdays. They take weekends and holidays off.
- Rules and Stuff:
Crypto Trading: Crypto is pretty new, so the rules are still being figured out. It’s not as controlled as stocks, and the rules can be different depending on where you live.
Stocks Trading: Stock trading is more established and watched over by the government. They make sure everything’s fair and safe.
- Big Price Changes:
Crypto Trading: Crypto prices can go wild! They can go way up or way down in a short time. This makes it much riskier than trading stocks.
Stocks Trading: Stocks can also change in price, but usually not as dramatically as crypto. It’s a bit steadier.
- Easy to Buy and Sell?
Crypto Trading: It’s pretty easy to get into crypto trading. You just need an internet connection and an account on a crypto exchange.
Stocks Trading: Stocks might need a bit more work. You’ll need to learn about brokers and how the stock market works.
- Who’s Doing It:
Crypto Trading: People of all kinds trade crypto. Some are tech fans, some want quick money, and others are just curious. Like any trading, crypto does not guarantee quick money and can lead to substantial losses.
Stocks Trading: Lots of different people trade stocks, too. Some are regular folks, while others are big investment companies.
- Risks of Crypto
It’s important to be aware of the risks involved in trading crypto. Here are some key risks to consider:
- Volatility: Cryptocurrencies are known for their extreme price volatility. Prices can change dramatically in a short period. While this volatility can create opportunities for gains, it also means that losses can happen just as quickly.
- Lack of Regulation: Cryptocurrency markets are less regulated compared to traditional financial markets. This can lead to issues like fraud, scams, and market manipulation. Young adults may be more vulnerable to falling for fraudulent schemes.
- Losing Money: Like any form of trading, you may lose the money you invest. If you’re not prepared for potential losses, it can lead to financial stress and difficulties.
- Inexperienced Decision-Making: Many young adults might not have much experience with investing or trading. Making hasty decisions without understanding the market or proper strategies could result in losses.
- Security Concerns: Cryptocurrency exchanges and wallets can be vulnerable to hacking and cyberattacks. If your account gets compromised, you could lose your investments.
- Emotional Trading: Young adults might be more prone to emotional decision-making. Fear of missing out (FOMO) or panic selling during price drops can lead to poor trading choices.
- Lack of Information: Reliable information about cryptocurrencies can be hard to find. Relying on rumours or unreliable sources can lead to misguided decisions.
- Addictive Behaviour: The fast-paced nature of crypto trading and the potential for quick profits can be addictive. Young adults might find themselves spending too much time and money on trading.
- Limited Understanding: Cryptocurrencies and the technology behind them can be complex. Investing in something you don’t fully understand can lead to poor choices.
- Regulatory Changes: Government regulations around cryptocurrencies can change suddenly, affecting the legality and viability of trading. This uncertainty can impact your investments.
- Pressure from Peers: Peer pressure or social media trends can influence young adults to invest in risky assets without proper research or understanding.
- Investing Over Savings: Putting too much money into trading crypto instead of saving for future needs like education, housing, or emergencies can leave you financially vulnerable.
Managing these risks
To balance these risks, young adults interested in trading crypto should:
- Educate Themselves: Take the time to learn about cryptocurrencies, blockchain technology, and how the market works.
- Start Small: Only invest what you can afford to lose without causing financial hardship.
- Use Reputable Exchanges: Choose well-established and regulated crypto exchanges to reduce the risk of security breaches.
- Diversify: Don’t put all your money into one cryptocurrency. Diversification can help spread risk.
- Set Limits: Establish clear trading goals and limits. Don’t chase losses or get caught up in emotional trading.
- Stay Skeptical: Be cautious of get-rich-quick schemes or overly optimistic claims about crypto investments.
- Seek Professional Advice: If unsure, consider seeking advice from financial professionals with cryptocurrency experience.
Remember, trading crypto is not a guaranteed way to make money and comes with real risks. Being informed and making careful decisions is key to managing those risks effectively.
Crypto Rules in the UK
If you’re a young adult aged 18 to 25 and you’re thinking about trading crypto in the UK, here’s what you need to know about the rules:
- Be Careful with Your Identity: When you use crypto exchanges, they’ll likely ask for your ID and stuff to make sure you’re not doing anything shady.
- Watch Out for Scams: Some people might try to trick you into giving them your crypto or money. Make sure you’re using trusted platforms, and don’t fall for promises that sound too good to be true.
- Learn About Taxes: If you make money from trading crypto, you might need to pay taxes on it, kind of like how you pay tax on your income. Keep track of your trades so you don’t get any surprises from the tax folks later.
- Think About Why You’re Doing It: Before you dive into trading, think about why you’re doing it. Are you looking for a quick buck, or do you really understand how it works? Don’t let FOMO drive your decisions.
- Keep Your Crypto Safe: Just like keeping your money safe in your wallet, you must keep your crypto safe online. Use strong passwords and consider using a hardware wallet if you’re trading a lot.
- Know Your Limits: Only invest money you can afford to lose. Crypto can be like a roller coaster, so be prepared for the ups and downs.
- Research, Research, Research: Understand what you’re getting into. Research the coins you’re interested in, learn how trading works, and be aware of the risks.
- Stay Updated: Rules and regulations can change, so it’s good to stay informed about any new guidelines the government might come up with.
- Ask for Help: If you’re not sure about something, don’t be afraid to ask for advice. There are experts out there who can help you understand things better.
Remember, trading crypto can be risky. Don’t rush into it without knowing what you’re doing. Take your time to learn and make wise decisions.
Why do stockbrokers not trade crypto?
You might wonder why the folks who help you with stock trading don’t really get into crypto trading. Here’s why:
- Know-How and Rules: The people who handle stock trading are really good at it because they’ve been doing it for ages. Crypto trading is pretty new and has its own set of rules that can be different in different places. So, it’s like asking a basketball coach to play football suddenly.
- Different Skills: Think of it like this: trading stocks is one game, and trading cryptocurrencies is another game with different rules. The wild ups and downs in crypto prices need a different kind of know-how. Stock traders might not have that skill set for crypto.
- Keeping Things Separate: Imagine you’re at a restaurant. They have a menu for food and another one for drinks. They keep things separate because food and drinks are different. Similarly, traditional stock trading and crypto trading are separate because they’re quite different from each other.
- Managing Risks: Just like playing a video game, some levels are more challenging than others. Crypto trading can be like a super tough level due to how quickly prices change. People who help with stocks usually want to keep things stable and not take too many risks.
- Tech and Safety: Trading cryptocurrencies involves using different tools and methods. It’s like needing a specific gadget for a specific game. Crypto has its own tech and security needs; not all stock trading platforms are set up for that.
- What People Want: You know how some people love action movies and others like romantic comedies? Some people want to trade stocks, and others are into crypto. Not all stock traders are equipped to handle both.
- Not Sure About the Rules: Imagine playing a game where the rules keep changing. Crypto regulations are still being figured out in many places, and that makes it a bit tricky for stock traders to dive into.
So, while you might find stock trading pros who are also into crypto, it’s a bit like asking a football player to play basketball—it’s not impossible, but they’d need to learn a whole new game!
Where to go for support
If you are concerned about the amount you are investing there are people who can help. You can call the National Gambling Helpline on 0808 8020 133 or go to Gamcare.org.uk.