Difference Between Stock Investing and Stock Trading

Which Is Better For Me: Investing In Stocks And Trading Stocks?

Stock investing and stock trading are different

Investing and trading are two financial ways to grow wealth over a period of time by buying and holding portfolios or building assets.

Although both have the same goal of making a profit, it turns out that investing in stocks is different from trading stocks.

The main difference between them is the time frame. Where the focus of investing is on a long-term rhythm while trading is a short-term transaction.

This is a difference in strategy, principles and procedures. To learn more, there is a discussion of each of these financial activities.

Stock investments by investors

Investment is defined as the process of accumulating an asset with the hope of making a profit in the future.

In other words, in the capital market, investment can be defined as the activity of buying stocks, storing them, and then selling them again.

Investors don’t really care about falling stock prices in the hopes that prices will rise again in the future.

Investors can be divided into institutional investors (banks, insurance companies, etc.) and private investors (private investors). One of the most famous investors is Warren Buffett.

strategy

Since this is a long-term stock, investors will be wary of the factors that can affect the stock.

You are less affected by price fluctuations. As a rule, stocks of healthy and well-working exporters with a solid foundation are bought.

They focus on buying stocks for the health of the company.

principle

Buy and hold is the basic principle of investors. You have investments with terms of more than one year.

They only release their shares when the target has been achieved or the quality of the issuer deteriorates.

The type of investment investors choose is typically not very liquid. They typically use fundamental analysis such as price / earnings ratio and management expectations to determine the company’s performance.

Is Holding Stocks Profitable – Independent Financial Planner I Risk

The risks associated with the investment are the counterparty risk and the partial payment risk. Counterparty risk arises when you need another party to buy an asset when selling, and vice versa.

The partial fill risk, on the other hand, is the risk that arises if your assets are only partially sold.

Analogy to land investments

An investor looking to invest their money to buy land chooses high quality land from an economic point of view, taking into account the land seller, certificate, location and the surrounding area.

The investor then buys the property and keeps it until retirement (example investment goal: pension financing).

Investors benefit from the land by renting it out and generating passive income in the form of rental fees.

Over time, the value of the land will increase, and upon retirement, the land will be spent.

In the event of a sudden need, such as medical expenses, etc., the investor sells the property.

If the price increases one year after the purchase or before the investor leaves, no property will be sold.

If you’re interested in investing strategies, here’s an online value investing course that you can take so you don’t buy the wrong stock later.

Traders trade stocks

A trader is someone who takes advantage of price changes to make a profit. In the commercial language, the term trading is referred to as a trader.

So the trader buys the stock at a lower price and sells it at a higher price. The period is usually short, 15 minutes, 30 minutes or a maximum of a week.

If the investor is satisfied with an annual win rate of 15%, Trading looks for that win rate every month. One of the most famous investors is George Soros.

strategy

Traders tend to focus their strategies on market sentiment and conditions

than on the performance of the issuer of the shares they buy.

If the stock market is bearish due to the political situation in the country or the global economy, traders will not enter the stock market until conditions return to normal.

Strategy and planning

Traders will be more focused and clear because they are not long trading positions. Some of the economic strategies used by traders are Stop Loss, Target Profit, and Risk / Reward Ratio.

principle

The basic principle of trading is buying and selling. You will always take advantage of price fluctuations to capitalize on the difference between buying and selling.

The counterparty risk is lower for traders, but traders are still unable to take advantage of the sharp drop in prices (tire short sales).

Commerce will buy land when it knows there will be many land buyers and the price of land will soon rise. Then they buy the land regardless of the quality of the land, the important thing is that they have land for sale.

They sell at what offers buyers a price that matches their expectations. Commerce will carry out these buying and selling transactions until there are no more land lovers.

Knowing the difference between a trader and an investor can help us clearly understand the strategy.

Which is better for me: investing in stocks or trading stocks?

People usually ask what’s more profitable when investing or trading stocks. Unfortunately, this question is not entirely correct. The most appropriate question should be: which is better for me, stock investing or stock trading?

If you are looking for long-term results, you will be better placed to invest in stocks. Learn basic analysis techniques.

If you are focused on short term results (aside from being the main source of income) you are better suited to trading stocks. Learning techniques of technical analysis (technical analysis).

Both have potential advantages, but also potential disadvantages. Before investing or trading stocks, make sure you have studied them first.