Tech
Entertainment
U.S. & World
Tech
Entertainment
U.S. & World

The Difference Between Trading vs. Investing

By on February 12, 2013

On this article today, we’ll give a brief explanation on the difference between trading vs. investing to anybody new to the markets or looking to dip their toes into it.

Investing

When you invest in a company you feel that the company you are investing in has the ability to grow for many years. Some people invest in companies because they like their products and feel they have the potential to keep making and selling then at a profit for many years to come.

Typically you expect to have your money in that company for many years to come. You benefit from dollar cost averaging as you add to your position over many months and years. The longer term time frame also smooths out day to day volatility in the markets. Investors typically look at the fundamentals of stocks such as earnings reports and news on the companies they follow in order to make investment decisions.

Trading

Contrary to investors traders typically expect to turn around a position fairly quickly. Sometimes a trade can last many months but typically when you trade you’re looking for short term movements wether up or down in a security. Traders often use technical analysis and other tools to analyze where price is going in the short term. Fundamentals matter but typically not as much as for investors.

Many people look into the market to gain wealth over many years but actually end up trading their present away by letting their emotions take over when price moves against them.

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