Beautiful Blog

MC Learn Fundamental Investing Trading vs Investing: Which is a Better Way to Enter the Stock Market?

A trader will buy and sell shares frequently by analyzing the technical charts of a stock. This involves understanding short-term patterns along with various support and resistance levels to enter and exit the positions. The stock market and the options market are where a trader would usually trade. The main differences between trading and investing are the time horizon and risks involved.

investing vs trading

InvestingTradingInvesting focuses on creating wealth over the long term by minimizing the risk. Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion. Don’t Monopolize the Conversation.We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts.

Traders look for high return on their investments by buying at low price and selling at a higher price. Once you learn and master the principles of trading, you can earn 15%-20% return on your investments per month. The profits thus generated are more frequent and regular. Through investing, there are higher chances of growing your capital as an investor, and if you have knowledge and patience as well, you can benefit well from investing especially over the long term.

Trader take higher risk compared to investors, and are usually rewarded with higher returns in a small span of time. To understand your risk taking ability, you must start trading with a virtual account and test your trading skills. If you make money consistently for a long period of time, great, but if you lose money, just ask yourself, would you be okay losing the same amount of money in real life? If your answer is yes, then you are probably ready to trade.

Excuses that are keeping you away from investing

But, if you opt to invest, you will need to put in significantly less time and effort and take fewer risks to grow your wealth in the long term. Understanding the fundamental differences between trading and investing is essential to determine which type would work best for you. On the other hand, traders are actively involved in the market and require their time & presence to make profits.

Can you be both a trader and investor?

A person can be a trader of one stock and be an investor in another stock. However, doing this would require you to understand both trading and investing and organise your actions to don’t mix up the two activities.

Such strategies are risky and not recommended for beginners. When discussing making money in the stock market, it is important to have the basics right. There is often confusion between the terms investing and trading, which is essential to be cleared.

Company Info

On the other hand, the time period for trading is short-term. Sometimes the trading period is even less than a minute when traders buy/sell stocks with explosive Know the power of the trader Umarkets forex broker and start making a profit movements and book profit soon enough. In trading, the trader’s endeavour is to generate positive cash flow through trading, it’s just like any other business.

Where can I find more details about stock investment and trading?

You can find more details about stock investment and trading on various online platforms. There are multiple educators and courses available on the internet and thousands of blogs and articles that can help you learn more about stock investing or trading.

Not everyone who learns technical analysis or fundamental analysis will make money. I hope now you understood that investing and trading are two different areas altogether. From day one in the stock market, adx trend indicator you should decide from your behavior and emotional skills whether you want to be a trader or an investor. Investing in stocks for long term comes with many additional advantages that traders do not get.

There are 2 types of people in the stock market, Traders and Investors. These 2 people have very different objectives when it comes to making money in the markets. Read on to know about the difference between an investor and a trader. Trading is all about finding the next profitable trade, and so the key is to keep buying and selling. Due to this short holding period and frequent churn, you miss out on the power of compounding. Sure trading can generate return but compounding is not the reason for it.


Here’s why hundreds of thousands of readers spread across more than 70 countries Trust Equitymaster. Considering all these factors, it makes sense for a retail investor to follow the investing approach. Marrying the two, the ‘what to buy’ part is answered through fundamental analysis. On the other hand, the ‘when to buy’ part is answered through technical analysis. Traders try to look at patterns from history to predict future movements in the stock price. Intraday Trading/Day Trading – You buy and sell stocks on the same day in this form of trading.

Some investors can simply go and invest in the index ETF and become the passive investor of the entire market. Because he believes that in the next 10 years the market is going to give 10% to 15% CAGR. On the other hand, investing requires patience and the ability to analyse the market deeply. Since 1996, Equitymaster has been the source for honest and credible opinions on investing in India. With solid research and in-depth analysis Equitymaster is dedicated towards making its readers- smarter, more confident and richer every day.

Mutual fund Investments

People have made huge money in the past decades by investing in good companies. Identify five to six good companies and keep investing in them and stay for the long term. Investing is something you can do part-time but trading needs a lot of focus and wholesome approach. There are doctors, engineers, and others who are into their profession and contributing to the economy.

  • The trader, on the other hand, has to exit the position and take the loss if the speculative bet doesn’t go in his or her favor within the determined time frame.
  • It is important to understand first that both trading and investing can be done by anyone.
  • Moreover, it will give you exposure to decide whether you have more of a trading mindset or the investing mindset.
  • Therefore, investing long-term might seem to be a less exciting way to grow your wealth than trading.

Typically, traders may not hold an asset for more than a few weeks, and some might even hold an asset for just a few minutes. Investing, on the other hand, has a longer holding period. It takes time for a company to grow and reap benefits for the investors.

Traders tend to take short-term positions in stocks, that usually range from a few seconds to days or sometimes months. Traders are people who try to make money from short term fluctuations in a stock’s price. Investors are people who try to make money by buying stocks that they expect to grow in the next few years. While the holding period of a stock indicates whether you had an asset for trading or invested in it, there are other differences between investment and trading. This section discusses some of the key differences between trading and investing. The goal of investing is to build wealth by buying and holding stocks that will give out attractive dividends or whose stock price will increase from the initial buy levels.

Which is better, trading or investing?

Trading and investing are two different styles of participating in the stock market and each has its own advantages and disadvantages. The major point of difference between them lies in the time-period involved and the risk.

Before the internet, there was no other option, but to make sales/purchases of stocks and securities through a broker, who was either an individual or a firm. For this, you were required to make a physical visit to the broker’s office, where the broker would trade on your behalf. Now you can trade conveniently through online trading accounts.

Furthermore, because their investment horizon is so short, their capital is not tied to a stock for an extended period of time, lowering their market risk exposure. Trading by nature involves more risk due to shorter time horizon. xtrade review It involves predicting market movements over few hours, days or months, which is unpredictable. Although risks are high, successful traders also earn higher returns due to the volatile nature of the markets in the short-term.

Futures and options can be used to hedge your portfolio, which means to protect the shares by applying a kind of risk management to your portfolio. The reason for this is simple — it is a long-term investment. So, there is always a chance that prices will rise sooner or later if the underlying company is increasing its profit. Therefore, you don’t need to worry about downtrends or recessions with this approach.

investing vs trading

You can earn 15 percent to 20 percent each month on your money once you learn and grasp the concepts of trading. Long-term investors mostly opt for stocks with fundamentals that depict a strong growth potential in the long term. A trader will require sophisticated skills in analyzing and reading various market tools like charts, patterns, indicators, etc. An investor, however, will concentrate more on the fundamental aspects of the company like the P/E ratio, year on year profits, forecasts, etc. Traders need to act dynamically and buy or sell based on the current trends while investors study the company closely, invest in it and hold it for a longer period to earn profit with lesser risk. There are several differences between trading and investing, but the most popular differences are the investment approach and the time involved.

Making profits would depend how your chosen stock performs in the long run. It requires patience and a careful approach to build a profitable portfolio. Trading and investing are two different styles of participating in the stock market and each has its own advantages and disadvantages. The major point of difference between them lies in the time-period involved and the risk.