Hi, if you land on this page it means you are interested in investing or I can say you may be interested in trading or either confuse between both terms (investing and trading).
Don’t worry here I will clear your confusion in this article and also if you are interested in investing and trading I will help you to understand it well and in-depth of this interesting topic of the financial market.
I am assuming that you have some information about the share market(equity market), and financial market before reading this article if not don’t worry you may proceed with reading it if you want some information about the share market you can read this article WHAT IS SHARE MARKET AND FINANCIAL MARKET
Investing and Trading are two different methods of attempting to profit from the share market or simply I can from the financial market. Remember these two are very different methods for getting profit on your capital.
Investors generally seek large returns over an extended period by buying and holding shares or components. Traders, by contrast, take advantage of both the rising and falling of the market to enter and exit positions over a shorter time frame taking smaller and more frequent profits.
In short, I can simply say about investment and trading are as follows:
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Investment takes a long time to approach a market target, and some people apply it to a retirement account.
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Trading involves short-term strategies to make daily returns, monthly or quarterly.
Let’s Discuss two of them in detail.
Investing:
The aim of investing is to build wealth over an extended period of time through buying and holding stocks, mutual funds, bonds, and other investment instruments.
Investing is basically called when you hold stocks, baskets of stocks, mutual funds, and other instruments for a minimum or at least for 1 year to decades.
By holding stocks for the long term investors can take advantage of perks like interest, dividends, and stock splits along the way.
Investors will ride out the market downtrends with the expectation that the market will rebound again and any loss will gradually cover and become profitable. Investors are more focused on the market fundamentals such as price-to-earning ratio and management forecast.
Trading:
Trading involves the most frequent buying and selling of stocks, commodities, currency pairs, or other instruments. Trading profits can be generated by buying at a lower price and selling at a higher price and vice versa is also true which is called short selling means a trader can make a profit in a falling market too.
The trader can make profits within specific periods of time by applying risk management on their capital by applying stop loss which can cut a trader’s loss automatically when the market moves against its prediction.
Traders fall into the following categories by the time frame in which they buy and hold the stocks, commodities, or other instruments.
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Scalp Trader: Positions are held for a second to a minute with no overnight position.
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Day Trader: Positions are held for a day with no overnight position.
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Position Trader: Positions are held for a month to a year.
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Swing trader: Positions are held from a day to a week.
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