Investing Vs Trading

First of all, everyone should understand the key difference between Investing and Trading.

Beginners, new comers in stock market should first try to become an investor instead of trader. I read in one article that 90% of day traders lost money at the end of the day as per a study of Taiwan stock market.

Let us leave trading to people having money. We can follow the following Golden Principles according to me:

1. Invest your own investible funds - not borrowed funds or funds kept aside for some other commitment. One shouldn't depend upon this money.

2. Fix a profit target and wait till that is reached. Don't panic even if the index crashes to 1000 points.

3. Don't fall into the trap of margin utilisation - a ploy by brokers to relieve you of your hard-earned money.

4. Don't listen to people recommending penny stocks & fly by night operators.

5. Give time for your money to grow. If you want it to grow very fast,then it can also come down very fast. Law of gravitation applies to money perfectly.

There is no reason why we should lose money.

cheers,
nkpanjiyar

can any one Tell me abt ashok leyland

ashok leyland has to cross rs25.30 only above that we can say that it is showing strength . it has got a very stong resistance at rs20 to rs20.25 below that there is no confirm trend

Very, very sensible post indeed.

Dear Members and Mr Panjiyar,

Apropos your good post.

There appears to be a little confusion about the words called "Traders", "Investors", "Brokers", et al...

Trading is a profession at individual and institutional level but investment at indivigual level is rarely a profession. If one has very large sum to invest and it needs his full time, then it is altogether different.It barely is an art of deployment of ones capital, if one has some.

Trading always had been a profession which, depending on the nature of trade, requires full time commitment and its sole purpose is primarily an earning (may be a decent living). Whether a cattle trader, a grain trader or stock trader, the idea is to take something out of selling and buying or holding a commodity, article or a promise as a middlemean for an expectation for a brief time. Investment is not trading, it is not for exchange but for staying with the object of investment for a considered period may be long, or short
.
So what? The apptitude, the stance, objectives. goals , methodology and psychlogy for the two has to be diffrent. Do not mix the two.

* Traders focus on buy and sell -Investor focus on appreciation.
* Traders have to act on the supply and demand situation, the current valuation,buying opportunities and selling avenues.
*Investors focus on growth, EPS, Bonus, Takeovers, Fundamentals, Management, etc but for a trader, the technicals of momentum, demand and suply, market sentiments, all the basics of "Bubbly ki Pyas". One could be a simple cattle trader to understand the logic.
* Trader can not and should not become investor. For him buying and selling as fast as possible is his "Dharma".He can not go Long. Think of a goat supplier keeping the cattle - stock for long - he would be ruined for ever.So profit or loss, he has to be out of the holding and keep doing his basic job - that os contnious buying and selling.
* A good trader does not carry home his trade but investment is nothing but remaining with investment and carrying it home.Investment is acquiring part ownership - Trading is not.

So what are you? A Trader or investor?. Remember, there are no part time traders.You can not trade from your office or a field location. It is contnious process.

I cut short, lest this post becomes lengthy.

With regards.
Junky

Words of gold written by nkpanjiyar

if u r trading the key is u need to cut ur losses short and let ur profits run up ..... thats the key

nkpanjiyar/junky

Nice write ups.....Thanx!

two good contrasting views on investor vs trader. Thank you both of you.

Hi All:

I personally believe that there is very little difference between trading and investing. My reasons for making such a statement is that the end result of both activity is the same EXPECTATION OF CAPITAL APPRECIATION (profits).

The route one takes to capital appreciation can be different :
1) It can be day trading or "scalping" - expected result - capital appreciation.
2) It can be medium to longer term trading - expected result - capital appreciation
3) Investing in mutual funds (which in turn trade in the markets) - expected result - capital appreciation.
4) Investing in with profit insurance policy (which in turn trade stock/bond markets) - expected result - capital appreciation.
5) Investing in pension plan ( pension plan manager trades markets as well) - expected result - capital appreciation.
6) Investing in gold, diamonds, arts and antiques - expected result - capital appreciation.
7)Investing in real estate - expected result - capital appreciation.

These are just few of the examples of trading and investing, but the expected result of either is CAPITAL APPRECIATION. No matter what people say it is the one and the same activity described by two different words. Remember Warren Buffet is trader and and an investor.

The other side of all this activity is that one can also expect capital depreciation (losses). Investments often go bad and can perform badly and cause losses. Watch what a 1000 point drop in the markets can do to your mutual fund valuation!! It would take a long long time for your capital just to recoup what you have just lost forget appreciation!! I would rather exit with a 200 point drop (loss) and wait to buy back the same mutual fund a 1000 points lower. The same applies to all trading or investing activities.

My final point, there is no difference between the two. The only difference is that when one talks about trading - the person sounds irresponsible although he may be great risk manager- while if one talks about investing - the person sounds very matured and conservative and risk averse although he may be trying to get you into a "scheme". Risk is the other side of the same coin with Reward written on the other side.

On a lighter note it is said that "When a trade goes bad it becomes a long term investment"

Nautilus