Share Market Trading
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The terms investing and trading have come to mean the length of time that one intends to hold on to stock. Today, the terms investing and trading are used almost interchangeably---with the distinction ...
The terms investing and trading have come to mean the length of time that one intends to hold on to stock. Today, the terms investing and trading are used almost interchangeably---with the distinction of time. One is "investing" if the shareholder intends to hold for a long period of time the other is "trading" if the stock is held for a very short period of time. Most market participants consider themselves to be "investors." But if you look at a list of the really big winners on Wall Street, you will see that most of those who make big profits, list themselves as "traders." Investors "Investors" put their money into stocks, real estate, etc., under the assumption that over time, the underlying investment will increase in value, and the investment will be profitable. Typically, investors do not have a plan for what to do if the investment decreases in value. They hold onto the investment in hopes it will bounce back and again become a winner. Investors anticipate declining markets with fear and anxiety, but usually do not plan ahead of time how they will respond to them. When faced with a declining (bear) market, they hold their positions and continue to lose. In many cases it is investors who realize how dangerous buy-and-hold investing can be to their savings. They do have some knowledge of trading. But that knowledge is tainted by how it is all too often described in the financial press that trading is risky, dangerous, foolish, bad, involves a great deal of work, etc.
Traders On the other hand "traders" take a proactive approach to their investing. They have a defined plan and invest with one goal, to put their capital into the markets and "profit." They also trade with a plan that tells them what to do in any situation, when to enter and when to exit. They never allow large losses. Much successive stock runs can outperform even the best long-term investment strategies. Unlike long-term investing, successful trading produces cash flow---small, repetitive trades, though each resulting in small gains, will add up to very large return. Trading does not mean you must move in and out of the markets frequently. This is a common misconception. A trader simply is one who has a plan for entering and exiting. They know what to do if their trade goes against them, and they know what to do when their trade is profitable. Even in bear markets, an experienced trader can catch the edges of volatile stocks and pile up almost shocking returns. Meanwhile, the long-term investor suffers through agonizing corrections or, at best, sideways no-gain market. Investing or Trading should be treated as business with a plan.
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