"Investing and Trading, aren't they the same thing?"
They are not the same, but understanding the difference can help you not only become more informed but improve your trading habits for long-term success!!
Let's jump right in and discuss the differences.
When someone is "investing in a particular security, they usually buy and hold the security to reap a profit over time. A question I'm sure you're thinking right now is, "Well, Corin, doesn't everyone have that objective?". However, the investor typically has a more extended holding period/objective than a stock trader.
"Investing takes a long-term approach to the markets and often applies to such purposes as retirement accounts."- Investopedia.
Here's an example:
An investor will purchase several Coca-Cola Company (KO) shares to hold the stock for 5+ years. They will conduct thorough research on the company (financials, dividend history, sales, etc.) to reason the holding period for the stock. Planning on holding it for 5+ years? Many investors like to look back 5+ years of research on the company to validate this information. Have they been not only profitable but do they hold extra cash? The account statement always answers that question.
Though past performance is not indicative of futures results, the way the company is managed may give investors confidence as to why they would be making a worthwhile investment.
Some people refer to themselves as "Traders," but a trader more than like to buy and sell for a profit as the primary objective. A trader may not be willing to hold onto a declining company -10% on a week from a rumor on the news. However, if the investor believes the rumor is temporary, the investor may hold his position (or hedge his position in a particular manner).
"Trading involves short-term strategies to maximize returns daily, monthly, or quarterly. Investors are more likely to ride out short-term losses, while traders will attempt to make transactions that can help them profit quickly from fluctuating markets." - Investopedia.
Most traders decide on technical analysis information received from stock charts or ideas generated from others' opinions. A trader may also not care about the company's fundamentals. They may be more focused on short-selling the stock (making money as the price goes down) for a quick profit or scalp.
There is no "set in stone" way to be a trader. Everyone is different in their objective and trading style.
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Disclaimer and more:
Once again, past performance is not indicative of futures results. The information given in the article is for educational purposes from the writer's ideas. Please see (About Me for more information.
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