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In terms of wealth creation and accumulation in the equity market, investing and trading are the two main activities in the field. On the other hand, investing and trading are quite different in terms of the approach to wealth creation and profit generation in the financial market.
In this article, we will tackle the Cryptocurrencies Ethereum News key differences one can observe between the activity of trading and of investing. If you want to become a successful trader or investor in the stock market, you better read this article. Read on!
Period
Trading is a way of holding stocks for just a short period of time. It can last up for a day, a week, or a couple of weeks. A trader usually holds stocks until the shares reach their short term high performance.
On the other hand, investing is an approach that works on the buy-and-hold principle. Investors invest their money for some years, decades, or even a longer time. Short term market fluctuations are insignificant during the long running investing approach.
Capital Growth
The traders usually look at the price movement of the Cryptocurrencies Litecoin News stock in the market. If the price goes higher, the trader may sell the stocks. To put it in simple terms, trading uses more skill for timing whereas investing is an art of creating wealth by compounding interest and dividends over the years by holding quality stocks in the market.
Risk
There’s no doubt that both trading and investing imply risk on your capital. On the flip side, trading comparatively attracts higher risks and higher potential returns since the price of a stock may go up or down many times in a short while.
And since investing is an art, it usually takes a while to develop see fruitful results. It involves relatively lower risk and lower returns in the short run but it can definitely deliver higher returns by compounding interests and dividends if help for a longer period of time. The daily market cycles do not normally affect much the quality of stock investments for a longer time.
Art vs. Skill
You can imagine trading and investing as two ways to play one kind of game. On the one hand, you watch skillful players in the field who aim to score as high as possible in a span of one day. Meanwhile, the art of the game is seen in the second way to play the game, which is more like a marathon.
Traders are skilled, technical people who time the market and learn market trends to reach higher profits in the stipulated time. It is related to the psychology of the market. Investors, on the other hand, analyze stocks that they want to invest in. Investing also requires learning business fundamentals and commitment to stay invested for a longer term. It is related to the philosophy that runs the business.
The Doers
Traders bet their money on a stock for the short term. They buy and sell fast to reach higher profits in the market. Missing the right time may lead to a loss in profits. They stare at the present performance of the companies to reach the higher price and book profits in short term.
Meanwhile, investors keep themselves away from the trends and invest in value. They invest for a longer period of time keeping an eye on the stocks that they hold. They patiently wait till the stock hits its highest potential.
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