What is investing? What is trading? There are two different types of players found in the equity market. These market players are the traders and the investors. Most of the time, these two are interchanged unknowing of their real meaning. Many people assume that an investor is a trader and a trader is an investor.
The fact is, these two are not the same. They have key differences worth knowing. Trading and investing are two different market players that are trying to take advantage of the market to make some profits. Although trading and investing are parts of the same category, they may act differently.
Investing is closely related to the purchase of company stocks and other instruments with an aim to have returned over a span of years. They are like the precious metal that you hold for several years. Because of this, it is just right for an investor to pick a company that will grow abundantly over years. Investing involves stern fundamental research on your possible investment target that can either be a bond or stocks. The most essential aim of an investor is to have a balanced portfolio with different bonds and stocks that will surely give returns over the years as its value increases, the same goes for its interest and dividends. With this in hand, you can attain the financial security that you are long waiting for.
Trading, on the other hand, is closely related to the buy and sell of stocks, currencies, cryptocurrencies, commodities, bonds, and other instruments. It also involves the use of a trading platform like MetaTrader. Trading involves making short-term profits out of small market movements. Thus, traders are taking advantage of the market’s volatility to realize profits and gains. Typically, traders make use of a trading system that helps them determine short-term trading patterns of prices. This method is referred to as technical analysis. This method closely involves frequent buy and sell of different financial instruments in the Forex market.
Investing vs. Trading
If you compare investing and trading, you will find a couple of differences that draw them apart. The main difference between these two is the course of time needed to realize the profits. In investing, you get to profit from your investment for years, when the price of your company stocks rises. The profit on investing in company stocks is also huge compared to the ones you get from trading. On the other hand, trading takes advantage of the market’s volatility. Traders are more into short-term gains rather than long-term gains which are presented when you invest. A trader tries to concentrate on the current value of the underlying asset. For investors, they are most interested in the financial performance of the company where they hold some shares.
Traders may hold their positions open for a day or two until such time that their target is reached in their MetaTrader trading platform. Investing in stocks requires you to hold your company shares for a much longer period, a year or more. Trading involves the selling of the financial instrument by the time it hits the target price while investing is riding together with the downtrends and only selling the stocks when required.