How TRADING and INVESTING differ?

 We always need clarification when we hear the terms Investing and Trading. But are these words different or do they have the same meaning? In this blog, we are going to discuss these two terms. So let's find the difference between these two.

 

Trading and investing have two different meanings and two different purposes. Both of them are for different kinds of people, and different mindsets. As traders and investors most put money in almost the same platform or instrument but the behavior of business and investment is other. 

1. TRADING -

Trading sounds very exciting and it itself gives the idea of making profits. If you thought the same, then you are right. Trading primarily focuses on profits. The traders are the ones who put the money in the stock/asset for short periods like a day, a week, or a few months. Traders trade in Stocks, Commodities, Currency, etc.

Traders are the predictors who predict whether the trend is going upwards or downwards and then they follow the same. The traders do not care about the company fundamentals, the valuation, or anything else. Traders always look for the opportunity and then they wait for the right time to enter the stock and exit the instrument by making the money.

Traders take a lot of time in analyzing the trends, making charts, earning daily, and making losses many of the trades. The traders use different types of tools like RSI, Moving Average, Supertrend, and more. There are different types of traders and they make a profit according to the classification, let us check them out.

1. Day Traders -  When a trader trades in a day only then that is known as a day trader. In easy language, the trader buys the asset today and sells it today only.

2. Scalp Traders - When the trader completes the trade within a few seconds or minutes then it is called Scalp Trading. 

3. Swing Trader - The trader who holds the position for a few days or weeks is then called a Swing Trader.

4. Positional Trader - When a trader holds the position for a few months to a year then they are called a Positional Trader.

The risk is higher in trading as they are mostly traded by taking leverage and paying more brokerage. Traders sometimes take a long position and some traders also short the position(like Hindenburg). A long position means when you buy the asset at a lower price and sell at a higher price. The short position is when the trader sells the asset at a higher price and buys again at a lower price. 

2. INVESTING -

Investors are the people who are more focused on building wealth for the long term without worrying about the daily ups and downs of the market. Investors primarily focus on generating value from the assets. Investors invest in stocks with strong fundamentals, fair value, and long-term perspectives like 3 years, 5 years, or more than a decade. Investors invest in Stocks, Debt Markets, Gold, etc.

Investors gain more profits as compared to traders as they hold the position for a very long period of time and apart from price appreciation, they get additional benefits like Dividend payouts, Voting rights, Stock splits, and Ownership of the company.

Investors mainly buy the assets at a lower price and sell after a very long period of time and in between, they keep averaging the stock by adding numbers when the price falls. The investors don't really care if the price of the stock falls down as they are going to hold for a very long. The investors have the superpower to compound the investment by reinvesting the dividends and interest received from the company.

If you want to start your trading and investment journey, then you can start it by using the ANGEL ONE app. If you are not using Angel One, then you can install it by clicking the image below.

NOTE- Investing and Trading both have risks and there are chances of losing money therefore invest or trade as per your research. I am not suggesting anyone invest or trade.

So here are the basic differences between INVESTING and TRADING. I hope you find this blog informative. If you are reading this blog for the first time then let me introduce myself, My name is Akash, and Founder of Finance Talks with Sky. I share information about personal finance, the stock market, and a lot more. To know more about finance and stock markets do follow Finance Talks with Sky.

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