Both traders and investors have one goal: to make a profit in the stock market. But, they do this through different means. Traders typically buy a stock and sell it within weeks, days, and sometimes even minutes. Through this, they make short-term profits. They focus more on the technical factors that affect a stock’s price rather than the long-term growth prospects of a company. What matters to a trader is which direction the stock will go, so they can make a profit on that trade.
Investors, in comparison, have a more long-term outlook. They focus on the long-term prospects of the stocks they buy and hold their stocks through volatile market conditions.
Timing is the key difference between the approach that traders and investors take but their focus differs considerably as well. Investors usually study a company’s long-term potential for value or growth, but traders take advantage of smaller price changes in the market. This might lead them to exit positions in just a few minutes. Day traders typically don’t hold their positions for more than a day, while swing traders may hold on to their stocks for a few days or weeks. But, they typically move on to the next stock as soon as they can.
How to Trade Wisely
If you are interested in trading, here are some tips for you
– It’s important to create a plan that will dictate when to buy and sell. Once you create your plan, stick to it.
– Work out how much you can afford to lose, and don’t make the mistake of trading with more than that amount.
– Understand your taxes: You might be able to get a tax deduction for trading expenses, but you may also need to pay some taxes. For short-term gains, you may have to pay taxes between 10% – 37%. Ensure you are aware of these terms.
How to Invest Wisely
– Create an investment plan for selling, buying, rebalancing your portfolio.
– Be prepared to stay invested, regardless of how volatile the market is. Patience is the key when you are investing.
– Research the financial strength and scope of growth of a company before you make an investment.