The Basic Difference Between Trading And Investing

People’s main motive to make money and they adapt to different ways to earn them. Trading and investing are two different ways to earn a profit in financial markets. Few people would be interested to trade and earn money while other’s aim would be an only investment.

Trading

Trading basically involves frequent selling and buying of commodities, stocks, currencies or any other financial instruments with the aim to generate returns which will outperform the buy-and-hold investing. While the investors are content with earning 10 to 15% as an annual return, the traders expect to earn 10% returns on their funds every month.

The profits in trading are generated usually through buying the asset at a low price and within a short timeframe, these assets will be sold at a high price.  Also, the traders make a profit by selling the asset at a high price and then buy it back when the price goes down. This is called as selling short.  Trading of cryptocurrencies is much easier to earn a profit as the market is volatile and the efficient auto-robots that are available in the market are quite helpful in giving you assistance with trading.  Since the market is gaining wide popularity and many people are coming towards to take part in the market, many scams and fake software’s have cropped up. Be careful of those like aurora mine which are fraudulent ones and are not helpful in any way.

Often the traders employ the technical analysis tools like stochastic oscillators and moving averages to find out the high-profitability setups of trading. There are different trading styles the traders adopt and the style is depended on the holding period or timeframe in which the financial instruments are traded. They are broadly classified into:

  • Position trader
  • Swing Trader
  • Scalp trader
  • Day trader

Investing

People who are into investment are aiming towards building wealth gradually over a long period of time through the process of buying and holding the financial instruments like stocks, bonds, mutual funds, etc.  Investors are able to enhance the profits through the process of compounding or by reinvesting the dividends and profits in additional stocks. These instruments are held for decades and they take the advantage of perks such as dividends, interest, etc.

The markets keep fluctuating, but the investors will able to manage the down trends as the prices are expected to rebound and recover the losses eventually. The major concerns of investors are the market fundamentals like management forecasts and earnings or price ratios.