What is the difference between an investor and a trader
Basics of options trading

What is the difference between an investor and a trader?

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An Investor and a trader are two different sorts of people whose perspective towards the financial market is very different from each other.  They have different goals, therefore have different strategies. 

Differences between an investor and a trader:-

Investors believe in building long term wealth. For an investor, buying every stock is like buying a part of a company. So for this, they do intensive research and analyze the fundamentals of the company. They don’t care much about daily fluctuations in the stock as well as in the financial market. The time period for holding the stock varies from years or to even decades, taking advantage of dividends, stock splits, bonuses, etc; along the way. Investors focus solely on the growth or rise of the company. They are less willing to take risks so they don’t use leverage and use their own capital for their investments. They usually have enough time to make decisions on their investments therefore it is less stressful; one should be emotionally controlled while making decisions logically.

Traders believe in generating profit from the short term fluctuations in the financial market and so for this, they mostly use technical analysis to get an estimate of short term opportunities. Daily updation in the financial market is important for traders as they trade relatively for a short period of time. Traders can be categorized according to the time frame in which they trade, for instance, scalp traders hold their stock for seconds to minutes, day traders hold their stock for a day with no overnight position, swing traders hold their stocks for days to weeks and position traders can hold it for months.

Time frame is one of the major difference between an investor and a trader. Traders can take advantage of both rising and falling market to earn profits by buying in a rising market and selling in a falling market. They use leverage for their trades which is an indicator of their willingness to take high risks. Emotional control is more needed in trading as traders make decisions more promptly in comparison to investors; they have to constantly monitor the price movements of their active trades which can be very stressful, so one has to be emotionally balanced while making decisions logically.

 Conclusion

Be an investor or a trader, depends totally on an individual’s choice and what he or she believes in more. Both methods involve risks, patience,  proper analysis and they both can be profitable if done in a proper manner

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