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Difference Between Trading and Investing

Trader

 A trader is the one who speculates the short term moves in prices of stocks. He makes use of technical indicators, price action, levels and news to make his entry .Trading has the potential of providing higher profits if you have a strategy that suits you well and have back tested .However the risk associated with trading is higher as compared to investing especially when you are using leverage.

Trading is similar to throwing a stone at a mango tree, if you have got the right skillset, you will definitely get the fruit.

Investor

An investor is one who finds immense possibilities and growth opportunities in a particular business and purchases shares in return for capital appreciation and profit shares he could get in the long run, may be a couple of years. He performs fundamental analysis of the firm as well as studies the business model of the firm along with a check on the management’s capabilities.

Investing is just like planting a mango tree, you take care of the plant and nurture it for years before getting your fruit.

Period

Traders hold stocks for short durations of time, say weeks, days, hours or even seconds. They make use of the short term trends

Investing is just like becoming a business partner, you wait for the price to reach the intrinsic value that you are expecting to make an exit from your position. Holding period can be months, years or even lifelong.

Capital Growth

Trading is a high income skill that helps you earn money with short term price fluctuations.

The difference between buying and selling price is the profit that you get. You can make an active source of income with this skill.

Investing is a long term approach to generate wealth in the long run. You get profit shares from the company you are investing in called dividends apart from the capital appreciation of your investments. Both dividends and compounding effect will favor you.

Risk

The risk you take depends on your trading setup and style.

A well planned trade always has a predefined stop loss and risk to reward rations planned in advance.

However the risk associated with trading is higher compared to investing while the rewards associated with trading is higher too.

The ones who succeed from stock markets.

Whether you are trading or investing, it is very important that you stay well informed about what you are doing before involving into it.

Get started with analyzing the markets, learning a strategy that suits your trading style and getting comfortable step by step with the positions that you are trading with are very important ignorer to evolve successful from the stock markets.

A good approach is to develop strategies that work for various sets of markets conditions, implementing appropriate risk to reward rations accompanied by picking good stocks at the right time is that what is going to help you succeed.

It’s a skill that you can use for generating a fortune in the long run and there’s no age boundaries to learn this skill.

Contact us if you would like to learn about the stock markets from absolute basics along with our time tested and accurate strategies for various sets of market conditions.

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