In Stock market there are 2 ways to gain from financial market Investing and Trading. Investing V/S Trading Difference:
Both investors and traders earn profit by participating in market. Investors gain larger returns over an extended period through buying and holding. Traders take advantage of both rising and falling markets to enter and exit positions over short time by taking entry exit frequently take smaller profits frequently.
What is Investing?
By investing one can gradually build wealth over an extended period of time through buying and holding shares for long term. They build portfolio of different stocks in baskets. Also mutual funds, bonds and other investment instruments are for considered as long term investments.
Investors not only gain returns after long-term but they also get benefits of yearly dividend, bonus etc. Investors are more concerned with market fundamentals, such as price-to-earnings ratios and management forecasts.
What is Trading?
Trading involves frequent transactions, such as buying and selling of stocks. Traders always enters in market for only profit they never desire for dividend or bonus their purpose is to make short term profit again and again instead of holding for long time. Investors expect 10-15% annual returns while traders expect 10% monthly returns.
There are different types of Traders: –
- Positional Trader: Positional trader means positions are held for years.
- Swing Trader: Swing trader means positions are held for weeks.
- Day Trader: In day trading positions are held throughout the day without carry forward.
- Scalp Trader: Positions are for hours without holding. Square off within a day.
- Investors invest for long term to get returns after retirement.
- Investor’s purpose for investing in long-term is gaining from dividends and bonus for years and after long term to get good-returns on the amount invested.
- Traders trades for short term for getting small profits frequently instead of waiting for years to get returns. That can be weekly, monthly or quarterly.
- Traders goal is get returns in short-term.
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