Investors Ain't Traders

An investor is one who sees an opportunity in a particular business or transaction and thus risks his income or other resources to be a part of the opportunity. Most times, an investor becomes a part owner of the business or venture. This means that a stock investor of a company intends to be a shareholder of the company and might not really focus on the short term price movements of the company's stock. The investor is more concerned about the long term success of the business.

His reasons are very clear. He must have done his analysis which would have considered what type of business is done by the company, its board of directors, the major shareholders of the company, the regulatory bodies, and the relevance of the business.

An investor believes that a company that sells a product that will appreciate now, as well as in future, is a good one and must be invested in.

A trader is one who sees the opportunity to make marginal gains in the sale and purchase of equities, securities, commodities, currencies, real estate or any other tradable item. A trader believes in fast turnover to generate profits.

A stock trader is like any other trader. They believe in buying and selling quickly. Another thing is that traders believe in the number of transactions variability. Their concern is biased towards making a consistent volume of transactions so as to maximize the margin, or spreads, to be gained from their trading activities.

This makes the trader a consistent analyst. An investor does not need to continuously analyze his company if he has been convinced before venturing into the business, but a successful trade must always be ready to analyze, compare and decide about numerous equities and stocks so as to make the best income out of them all.

The difference between a trader and an investor cannot be over emphasized. An investor concerns himself with the long term analysis of a company, equity, commodity, currency or other asset before placing his money on the line, while a trader only needs to concern himself with the present outlook of the equity, commodity, currency or other.

Investors and traders alike utilize analytic indicators like MACD, RSI, STOCHASTICS, BOLLINGER BANDS and other Technical Indicators to make up their minds concerning any of their transactions.

People trade and invest because of various reasons which include the following:

1. To make their money work for them
2. To make income or more money
3. To preserve their wealth against inflation
4. To become rich
5. It’s a hobby for some people
6. To be part of a successful venture

All the above stated reasons make trading and investing really interesting. This is why there is volatility on the market. The perception of all people differ and therefore continues to vary creating unpredictable market action.

Some people will say it’s better to be a trader while others will say it’s better to be an investor. I say it’s better to be either of the two. The reason is that both ways your money works for you. Your money cannot remain the same if you properly analyze before taking investment or trading decisions.

Traders are not Investors and vice versa, but a trader can decide to become an investor while an investor can also decide to become a trader.

Related Article: Investing vs. Trading