Trading and investing may seem similar to you but after reading this you will be clear about their difference. Trading is transacting stocks based on particular tactics; we use technical indicators to determine low risk, high reward, setups, and strategies for a high probability of trade. Trading uses sophisticated tools and metrics to conduct accurate research and/or market setups. Now there are different types of people in the stock market, some of them are day-traders who seize the opportunity when they see one by buying the stocks when they’re down and sell them when they see the right opportunity.
The second type of people that generally trade in stocks are people who have retired or the ones who have saved some money and want to invest in great stocks and wait for the return after months or years. They receive a nice cheque by the end of every fiscal year and they’re happy with that.
Day-trading and investment
There are pros and cons of every type whether you’re a day-trader or an investor. In the case of a day trader, day traders are at an advantage because they can see the market going up and down and they can make quick informed decisions at the spot based on the strategies they’ve determined previously so they can strike when the iron is red hot. They can also reinvest the money they’ve earned in the form of profits and save their own money just to be on the safe side.
In the case of an investor, there’s always risk due to the uncertainty of the market due to socio-political issues. They can lose all of their savings within one go whereas a day-trader is at an advantage because he can make informed decisions based on the trends and software he uses to determine the fluctuations. That’s probably one of the biggest differences between trading and investing. There are other types of traders as well in the stock market like “swing traders” and “position traders” and they lie somewhere between an investor and a day-trader and/or if you’re using an online trading account rather than sitting in the stock exchange every single day.
Which one is better?
Now the question arises which one’s better? Well, there’s no clear answer to this question because at the end of the day it all comes down to the strategies you chose before entering the market. We’ve already discussed that trading is not similar to gambling so you need a proper strategy before entering the market and you need to have an exit plan because unlike gambling, there’s a good chance that by the end of the day if you play your cards right you’ll earn a good sum of money.
