Time and Analysis; The Major Difference between Traders and Investors
A lot of people have seen the stock market as a trading ground. Well, it is no lie since the stock market is a place for both traders and investors. Far from the past where people call on stock brokers to help lock a trade nowadays, people can trade and even invest from the luxury of their homes. What is trading and what is investing? This two questions are very complicated because most people that see themselves as traders are just short term investors while a lot of people that think they are investing are out rightly just trading.
There is barely no difference between a trader and an investor as both are buying and selling to make profit. The difference between the two parties is timing and analysis. As a trader, profit is dependent on volatility and liquidity while as an investor, it is dependent on appreciation. The difference between the both is quite distinct and only noticeable by people who are into it.
As an investor, the aim is to buy at a very low rate and wait for a very long time within the time being of 5, 10, 30 or more years with the aim of getting appreciation as well as dividend from investment in most cases, investors buy more when there is a drop in price of the stocks.so as to make profit over a long term when the price increases. While for traders it is a short time thing like day trading (very short which includes seconds, minutes, hours, days), to swing trading which can go into weeks, months and in some cases short years. Short term lows and high over a very short period is what traders look out for.
Investors like Warren Buffet always look into the company’s intrinsic value to its market value before investing. Investors look into buying a company’s shares when it is below the actual valuation of the company internally and not the high market value but this is not the same for traders. Traders do not care about the internal stability of a company, they only care about the short rise and fall of the stock market with the use of tools. Traders can trade a near bankrupt company with the aim of making profit, they do this with the aim of short term profit which is like gambling.