How is investment different from trading and what to choose depending on the purpose?

A speculator versus a reasonable investor, or how is a trader different from a long-term investor? A novice participant in the stock market is faced with an investment and speculative approach. The difference between them is not obvious, which makes it seem that you can skip the study of the issue, which is a big mistake. This is the basics of the stock market that you need to understand in order to avoid new questions, serious mistakes and loss of money. So what is the difference between trading and investing – let’s start with the basics.

Speculative approach of a trader

The speculative approach is used by traders who make money on short-term market fluctuations, having seen the right situation, make a deal that lasts from a few seconds to one year. A trader who enters into second deals uses the scalping method, literally cuts off small profits on large volumes of the asset. A person engaged in hourly trading is called an intraday trader, he practically does not transfer transactions to the next day. Transactions with a range of several days are called swing trading, such a transaction can be postponed for months, but up to one year.
Trading is not easy, because it requires constant attention and concentration. Being at the computer is tiring, in addition, psychological factors lead to poor health. For these reasons, advertising and social networks trumpeting about easy money are lies that have no real basis. No signals, indicators and other tools will help you get easy money. The speculative approach will not suit everyone, it will require nerves of steel, the ability to control oneself in a difficult moment and a cool head throughout the work. In addition, you need to study all the intricacies of technical analysis, the main tool for a trader, as well as technical indicators, assistants in the analysis of the current asset.
After that, you can start making money in the stock market, although it will not always work out, mistakes in the stock market are a normal thing and part of a trader’s practice. The work is based on exhausting market analysis, through the asset price chart. Seeing a suitable situation, the trader makes a deal.
Such charts in a trader’s work are commonplace [/ caption] To predict the price movement, a trader refers to the statistical patterns of price changes and to mathematical techniques. To do this, he first of all looks at the chart and studies how the price has changed over a certain period of time. If you study the chart for a long time, you will notice that the price moves according to certain laws – patterns. They are formed due to the fact that the crowd has the same preferences and habits, regardless of the era. Some traders generally ignore the news and look only at the chart, but there are those who focus on news and operational events, but they are interested in the publication of the company’s financial statements not in the long horizon, but in the short term.
The life of a trader – not everyone is ready for this [/ caption]

It should be borne in mind that before the trader really made all transactions with his hands and of course this profession was considered very exhausting. Now the situation is changing, because manual trading is being replaced by machine trading –
algorithmic trading. This is a situation when transactions on the stock exchange are made by robots, but a person first draws up his own trading system, according to which he will write a trading advisor.

There is a human factor here, but such a machine saves the trader’s time. The statistics are surprising: on the New York Stock Exchange, about 95 percent of all speculative transactions are made by robots, that is, today trading is a battle of robots. First of all, trading means trading on the futures exchange market, that is, on the forts market. This may be the derivatives market of the Moscow Exchange, where futures and options are traded, or a foreign market. In addition, trading includes work on the forex market. There are fraudulent companies here, there are companies with a license from the Bank of Russia or foreign licenses. These companies are a little more decent, but even they have a rather sad statistics of traders on the long horizon. This is due to unscrupulous advertising and attracting people to trading who psychologically need to invest.
Trading has a number of undeniable advantages: firstly, traders’ money is not frozen for a long time, and secondly, you can earn on market fluctuations and you can also lose money on these fluctuations, you can earn both on growth and on a fall, which cannot be said about the investment approach .

Investment contribution to the future

Investing is the polar opposite of trading. If a trader earns thanks to short-term fluctuations, then investors do not pay attention to these fluctuations. Their goal is global perspectives and a long-term horizon. It doesn’t matter to an investor if the share price fell by 20 percent today or rose by 30 percent tomorrow.
into two main categories: equity investment – this includes shares for shares in a company, debt – a case when an investor lends to the state or a company and receives interest for it – this includes bonds.

If a trader relies on mathematical statistical probability, then the investor’s task is to conduct a competent collection and analysis of information and make the right decision for a long period

How investors analyze information: when they choose a stock to buy, they look in which country this stock is traded, what is the investment climate there, the political, macroeconomic situation, then they choose the industry in which they want to buy a stock, they look at how promising it is, whether it is in decline, there is money and potential for development there. Only then they choose a specific company, analyze the effectiveness of its business model, consider financial indicators, statements, ratios, try to understand how stock quotes of a share correspond to its real value. Investors are trying to choose undervalued, cheap companies with the expectation that now the market simply does not yet understand the value of this company, but over time, quotes will rise. The logic of the investor is that if the business is good, working, promising, then sooner or later the quotes of the company will catch up, and the investor knows how to wait. When making decisions, investors are guided by fundamental analysis, but technical analysis is not alien to them. The investor looks at the chart to choose the right entry point.

Fundamental analysis is a complex time-consuming process, but today it has become easier thanks to technological progress. Now there is no need to draw lines and indicators yourself. In fundamental analysis, it is not at all necessary to independently calculate all the coefficients – there are special programs, stock screamers that make it easier for an investor to choose an instrument for investment.

What are the benefits of investing?

The fact that, firstly, this is of course a significant time saving compared to trading – and investment may not be the main profession, but some hobby in your spare time. The investment also has disadvantages: first, the money is frozen for a long time, the capital is not mobile. Investing is a labor intensive process. You should not spare time to improve your knowledge, you need to tune in to a long wait and be able to survive the fall of the market and the fall of your own funds. You also need not to stop at one company, but to form a full-fledged portfolio that will meet all personal needs and needs.

Investments vs trading – the difference between an investor and a trader is clear

The article highlights common points regarding one profession, but with different approaches. A trader and an investor are equally good, each pursues its own goal. Both need to learn and improve themselves so that every trade and every analysis bears fruit. The earnings of an investor and a trader differ, due to their time. We can say that a good profitability of a trader is 30%, but this is not so, this is a good income, and it is above the average for the market. If the trader has not lost, then he has already earned, as they say in professional circles. The investor is more modest and expects to receive 10-15% per annum and many will be satisfied.
The path of a trader and investor [/ caption] The choice of approach depends on the person, his goals, character and abilities. Not everyone will be able to fit into the skin of a bear and be a bear, for a trader, a warehouse of character is important, this is part of a successful job. It is easier for investors because of the wait-and-see approach, you can suffer losses and wait for profits for years. The occupation is certainly attractive and will not be superfluous, everyone needs a money-box for a rainy day, and investments allow you to make a competent black box, with additional income.