Are You a Trader or an Investor?



Finance Guru Speaks: This article will throw some light on the differences between Trading and Investing.


Share Markets around the world are considered to be places where you can get rich quickly! It is presumed to be like a Casino where one can take chances to earn quick money.

If you have participated in the Share Market, then do you agree with the above assumptions or thoughts? 

If you agree, then you are in the very lucky 5% club of the overall Stock Market participants who are really earning money from the Market. Rest 95% are the ones who are constantly on the losing side.

So, coming back to the article topic -

How Trading and Investing are different?

I will cover the differences based on some of the areas so that they can be easily understood.

1. What is their Market View?

Trading: Traders have a short term view of the market. Meaning, they have entered the market to make quick money. Mostly they book the profits or loss within the same day. Such Traders are known as Intraday Traders. 
Some Traders can carry their position for a few days to weeks. They are known as Swing or Positional Traders.

Investing: Investors have a longer-term view of the market. Their aim is to generate wealth by the power of compounding. Normally, they invest in blue-chip or large-cap companies and they are not in a hurry to book profits or loss. Whenever the market goes into a correction, they try to buy such Shares at low prices.

difference between Technical Analysis and Fundamental Analysis

2. Fundamental or Technical Analysis?



Trading: Traders rely more on Technical Analysis. Meaning, they just check the Price actions on the Chart and Volume. They are least worried about the fundamental aspects of the Company as they just want to catch the momentum of buying or selling the Share to catch quick profits.

Time frame for Technical Analysis

Investing: Investors make more use of Fundamental Analysis for the selection of the Stocks. Before buying, they check the fundamentals of the Company like current debt, Book Value, Net Sales per Share, Profitability, Debt to Equity ratio, Promoters Holding, FIIs/DIIs Holding, Management focus, PE ratio, etc.
They put their money only when they are satisfied with the growth potential of the Company.

Time frame for Fundamental Analysis

Having said that, some wise investors use Technical Analysis for making Entry decisions. If the Stock is in the Overbought zone, they tend to avoid buying such overvalues Stock even though they have good fundamentals.

3. How do they Earn?

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