Which is more profitable trading or investing ? And what’s the difference between them.

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Which is more profitable Trading or investing ?

So today I’ll talking about the differences between traders and investors because these are the two terms that usually come up in the internet or come up in people’s mind when it comes to investing or when it comes to the stock market there’s no clear cut definition or distinction between the word traders and investors. Because different people view them differently different people have different definitions for them in general but for me personally the distinction or rather the guideline that plays between traders and investors would be the time horizon that they invest in or trade in as well as the transaction volume or also the type of risk habit, risk management that they have so the first major differences that I feel for traders and investors are the time horizon. 

What are the difference between Traders and Investers.

So traders usually have transactions in a shorter time period as compared to investors traders might trade in between anytime from hours to days to weeks whereas investors sometimes go over a time horizon of months to years and even a decade the next major difference between a trader and investor would be the type of risk level they have over the stock they are buying into. Traders sometimes they do not look so much into the fundamentals of the stock but rather they look at the technical analysis of the stock which is looking at the graph and looking at a price volume and looking at different indicators that might help them make their trading decisions they do not have to bother so much or have so much in-depth analysis about the fundamentals of the company because they’re only trading it in a shorter time horizon, they’re not planning to hold the stock for long at all whereas investors on the other hand they look a lot into fundamental analysis rather than technical analysis and fundamental analysis what is that is it looks into the background of the company, it does a deep dive into the different financial figures, the business model the management team of the company before deciding if this is a good company and if there’s a good bright future and growth for this company before investing into it.

What should you choose ?

when it comes to traders and investors the first question that comes to people’s mind would be so which do I choose? Which path do I take, do I be a trader? do I go through transactions on a much higher volume on a daily basis weekly basis or do I just be a passive investor? I buy into the stocks and then I just put it there and let it go so which one should I choose? Which one is better? Which one makes more money? so the answer to these questions is that there’s no one best way or one best type of investing or trading for everyone it’s more of you have to find a strategy that suits you and your personality and your lifestyle the best after I take a deeper dive down into the different types of traders and investors then I will go through how to analyze which type of strategy suits you the best.

Different types of Traders

First type is intraday traders where they trade between minutes, hours and they buy and sell within the same day so they might buy when the market opens and within a few minutes or whenever within few hours of their take profit level they will sell it off and that’s the end of their trade so day traders are on a longer time period where sometimes they trade, sometimes still also within the day or sometimes they trade – they buy today and they sell tomorrow they buy today, they sell two days later so usually it happens between a few days less than a week whereas the third type of traders will be swing traders where it goes for even longer time period from days to weeks to even months. These traders they hop onto the train per se where they are able to see a trend developing so they buy into the trend and wait for the trend to finalize or wait for the trend to be over before selling the stock off and taking their profit so these different types of traders have all have different strategies and different risk management that they take to be able to get profit. 

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On the other hand investors there are a multitude of types of investing out there but the more basic types will be either growth investors or value investors so value investors a very good and prominent figure that everyone will know about is Warren Buffet, where he got to where he is today based on value investing so what value investing is that essentially you buy into good companies at a fair price, where they are undervalued or based on your own analysis you think that this company is worth more than the price its trading at right now so you buy into the company and wait for the day that if you just if you intrinsic value or grow to the point where you think that okay this is how much the company is worth before selling it off. 

Growth investors on the other hand they look at stocks that are booming and growing very rapidly so sometimes the stock might already be overvalued per second based on their price to earning ratio maybe sometimes it could be already very overvalued in the eyes of analysts in banks or the general public’s eyes but these growth investors they feel that these companies are going very rapidly, so that there’s still a lot of space and room for both and they still believe in the company so both investors usually they look at stocks such as technological stocks where they really just boom at a very quick pace and it’s able to take over a huge portion of the market share very quickly. Now we come back to the important part where everyone is curious about which is so which strategy is best.

Reasons for getting into Trade

So like I said it comes back down to the lifestyle and personality that you have because if let’s say now you’re a working adult and you have a nine-to-five job you will not have the time and effort to be able to look through the market consistently on a daily basis constantly being on your phone on your laptops looking at how the market is developing. So definitely it does not make sense nor is it realistic for you to be a day trader, where you have to monitor the market on a daily basis so even if you have the intention of being a trader and not an investor you could only choose ways that would be able to work around your current lifestyle which is a nine-to-five job so maybe you could trade on a daily basis on a weekly basis where when you drag the time horizon to be longer. 

You will have more time to buy today and sell a few days later instead of executing the trades on a single day because you will be too busy with your full-time job to do so on the other hand let’s say if you are a student and you think that you want to be a trader but then let’s say you feel that you don’t have enough capital to do so so definitely there are ways to go about it where there are accounts such as contra account and margin accounts where you could leverage on money that’s not yours to partake in trades but definitely I would only recommend this to people who have already have sufficient prior experience in the market before jumping into these strategies that will definitely earn you more money but also lose you more money as well if you are someone that’s very risk adverse and you think that losing a little bit of money is a huge deal to you.

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You have a very low amplitude for taking up risk that it definitely makes more sense for you to be a long-term investor in very risk adverse stock such as buying into ETFs and Index Funds that mirrors let’s say an index like the SP500 or buying into ETF that mirrors all the technological stocks in the US so when you invest into these stocks or these index funds it definitely reduces the risk by a lot because you are buying into a multitude of companies and it definitely balances your portfolio out and it’s definitely more diversified so which is why at the end of the day which strategy suits you better is depending on how risk adverse are you and also what is your current lifestyle do you have time to look at it do you even have interest to look at it are you interested in looking at figures, numbers are you interested in looking at news reports looking at the annual report of companies having a deep dive into the business model do they have a high barriers to entry all this comes down to at the end of the day what suits you better

Conclusion

So once you find the strategy that suits you better you just have to take action and really start right away instead of just letting your money be unused in a bank account with the mere little bit of interest that will not help your money grow so choosing the right strategy is not as important as taking action right away because any strategy that you use as long as you use it right with discipline and with consistent amount of money pumped in every week, every month, or every year definitely you would be profitable in the long run.

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