More often than not, trading and investing are used interchangeably, even by industry giants. If you are getting into trading or investing as a beginner, we suggest that you understand the primary differences between the two and know what it takes to become successful in each. Most famous investors also keep away a significant portion of their capital for trading. In fact, the profits of their trading activities are mostly their investment capital. Read on to know more about the difference between traders and investors.
Short term vs long term
Traders mainly use their knowledge to make profits in the short term. Some times, a class of traders like scalpers stay in a trade for just a few seconds. Their cumulative gains over the months will amount to something substantial if they stick to a profitable strategy.
Investors are more focussed on long term gains and hold their positions for at least one year. Most long term investments are taken with the hope of giving a few percentage points greater than Nifty and Sensex benchmarks.
Technical vs fundamental analysis
Technical analysis involves the understanding of indicators, studies and other market generated information which can drive the price of a stock.
Fundamental analysis is understanding the YOY profits, EBITA and other fundamental aspects of a company for long term gains.
Discipline vs Patience
Traders who follow their own rules strictly and revisit their strategy periodically to make amends to it are more successful that traders who do not have any plan.
Investors, on the other hand, are required to have patience as an important virtue. Since their returns can be realised only after several years, they cannot depend on it for their monthly expenses but simply look at it as wealth building.