Stock Market Guide: Investing vs. Trading
Success in stock market needs patience, vision, research and hard work. There is no fixed strategy or technique to provide you profit from stock market year after year. Many external and internal factors are responsible for movement of stock prices. Such factors are mostly unpredictable and keep on changing.
As such predicting stock price movement is a very difficult and highly specialized job.There are mainly two types of players in stock market. Traders in stock market buy and hold stock for small period and benefit from change in price within that time. Such people are actively involved and track prices of stocks every day.
Tools and techniques adopted by trader are primarily designed to capture the trend of stock price spanning over few weeks or probably months. Trading stocks is a full-time job for most traders while some do it part-time.
Investors in stock market are those who prefer to buy and hold stocks for longer period than traders in anticipation of value appreciation.Investors primarily spread investment over a period, aiming to average and neutralize stock price movement. An investor should not expect quick return like trader, as strategy, techniques and investment patterns of both differ substantially.
Thus traders are looking to earn quick money and investors are aiming long term wealth creation from stock market.
Trading is high risk business. Leveraged trading opted by most traders is even more risky.
If your tools and techniques click then you may gain or else lose big chunk of your money within a day.Top of a stock price is elusive and a trader can hardly find bottom price.
Greed and fear are upper and lower limits of stock trading. It is desirable that a trader acquires professional knowledge and training; remain alert and updated about factors that affect market, before plunging in stock trading.
Investors on the other hand should be aware of the market condition. Studying investment portfolio of successful mutual fund can give an idea about how to build or structure the portfolio.
Evaluating the performance of stocks in portfolio should be done periodically. Selling, adding or eliminating shares should be done as deemed fit or advised by financial adviser.
