Blog #16 - Investors vs. Traders: Who You Are?

 

Investors vs. Traders: Who You Are?

 

Today there is no official standard to differentiate a trader and an investor. It is perception in our society that if someone is linked with share market, in any form, is a trader but few of them know who investor is. Whenever it comes to investor people think it as a very big player who is supporting some major projects which is right in its place but the word investor is more than this.

 

Trader

By the definition, a trader is a person who buys/sells shares are relatively shorter intervals to earn profit. A trader is not restricted to going long or short on the market or individual stock derivatives. Further a trader may be a day trader i.e. trader who buy/sell and square of its position on the same day and the trading is called intraday trading. There are two types of traders also namely swing trader and position trader. A swing trader is the trader who trades various ups and down swings i.e. from one pivot to another. On the other hand a position trader is one who holds his long and short positions for periods ranging from several days to several weeks.

In today market most of the trading is done on the basis of charting because it is perception among trading communities that it is the only consistent method of making money. During market hours traders are only one who participates actively. Traders put a portion of money on the basis of chart patterns and indicators and try to earn several times their risk.

 

Trader vs. Investor

Investor

There are investors who buy and hold stocks for several years. Investors don’t trade according to of the market, instead of it; they make decisions of buying based on the fundamental analysis and market news. Investors, in my opinion, generally makes good profits, exception occurs when they enter the market without knowledge. It may happen that one can invest a large amount of money in a particular hope in hope that the stock would be a multi-bagger. But if someone chooses wrong stock the game may reverse that is why it recommended for investors to rely on the fundamentals irrespective of swings. I haven’t found such a multi-bagger stock and still looking waiting for it. Anyone, who has patience and good knowledge of how to analyze stock, can make a good profit. In share market, share price doesn’t matter but the time i.e. the time of entry in the stock.

 

Basically I would characterize anyone holding position for less than one year as trader and other as investors. 

 

There was a time when physical shares used to be traded on the Indian stock market and there were a lot of hassles in getting transferred; forms needed to be filling, frequent cases of bad delivery etc. but now the things have changed. All the shares and derivatives products are traded in electronic form and hence there is no procedural loss while trading them.

Today Indian share markets are one of the most sophisticated in terms of procedures and systems. And they are at the verge of explosive growth.

 

Here is the list of some successful investors:

Dennis Gartman

Warren Buffett

Bill Gross

Prince Alwaleed Bin Talal

Carl Icahn

Carlos Slim

 

Reminder:

The views are of author and it should not be considered as suggestion/recommendation. Consult to your financial advisor before any financial move. "Finance With Atul" will not be responsible for any profit or loss.