What's The Difference Between Trading & Investing?
Investing and trading have some similarities and often it's used interchangeably. However, there are some important differences and you must know about them before you start either, so you know which is more suitable for you.
The main differences
Timeframe
Investors look for growth and usually hold positions for longer than traders, who are looking for income.
Goals
A trader's goal is to generate returns that are greater than the buy-and-hold strategy used mainly by investors.
Frequency
Trading involves placing frequent positions in the market, whereas investing involes placing fewer trades.
warning: most traders and investors lose money
Which is right for me, Trading or Investing?
If you new to the world of trading and investing, or you don't have much time; then investing is probably the best option.
However, if you have a good understanding of the financial markets and perhaps you have experience with investing, and/or you have the time to learn how to trade and you want a regular income; then trading could be a possible path for you.
How can a trader reduce their risk?
Have a plan
We have all heard the saying "To fail to plan is to plan to fail". This is true also with trading.
Test, test and test
Once you have a plan test it. Backtest with past data, and front test using a demo account.
Master just a few assets
Don't become a jack of all trades, become proficient in one or two assets.
How can an investor reduce their risk?
Diversify your portflio
Don't buy shares in one company or one type of industry investing in indices is a simple way to diversify.
Buy and forget
Try not to check your portfolio too often, especially during periods of uncertainty within the markets.
Invest in what you know
Don't just invest in an asset because a top investor said you should, do your due diligence.
