Trading vs Investing : In this world, everyone wants earned lot of money in their life. When thinks about money, first word came into mind is “Stock Market” & in that ”Trading vs Investing”.
The two ways to try to make money in the financial markets, investing and trading are very different from one another. Both traders and investors want to profit from market activity. Investors typically use purchasing and holding to achieve higher returns over a longer period of time. Traders, on the other hand, profit from both rising and falling markets by entering and exiting positions more quickly and taking smaller, more frequent profits.
Investing
Investing is the process of purchasing and holding a portfolio of stocks, baskets of stocks, mutual funds, bonds, and other investment instruments with the intention of steadily accumulating wealth over an extended period of time.
By compounding their gains or reinvested any profits and dividends into other shares of stock, investors frequently increase their profits.
Holding investments for years or even decades allows investors to benefit from benefits like interest, dividends, and stock splits. Markets will always fluctuate, but investors will “ride out” the downtrends in the hope that prices will eventually rise and any losses will be made up. Typically, market fundamentals like price-to-earnings ratios and management predictions are of more concern to investors.
Trading
Buying and selling stocks, commodities, currency pairs, and other instruments are more regular transactions involved in trading. To provide returns that outperform buy-and-hold investment is the aim. Investors might be happy with returns of 10% to 15% annually, whereas traders might aim for a 10% return each month. Buying at a lower price and selling at a higher price within a reasonably short period of time results in trading profits. The opposite is also true: in order to profit from declining markets, one can sell at a premium and buy to cover at a discount (a strategy known as “selling short”).
A protective stop-loss order is frequently used by traders to automatically close out losing positions at a predetermined price level, while buy-and-hold investors wait out less profitable positions. Traders aim to make gains within a specific time frame. To identify high-probability trading setups, traders frequently use technical analysis tools like stochastic oscillators and moving averages.
The buying and selling of stocks, commodities, or other trading instruments is referred to as a trader’s style, and it also relates to the holding period or timeframe used. Traders typically fit into one of four groups:
Position traders: Positions are kept for months or even years.
Swing Trader: Positions are held for days or weeks.
Day trader: Positions are only held for the duration of the day; no overnight positions are taken.
Scalp traders: There are no overnight positions; positions are held for a few seconds to minutes.
The size of the trader’s account, the amount of time available for trading, the trader’s level of expertise, personality, and risk tolerance are all important considerations when choosing a trading strategy.
Moral of the Trading vs Investing story: Trading is the game of the consistency & heavy Risk Management. Investing is against the Trading. It’s game of Patience.
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