Stock trader and the stock investor many would claim they are one in the same. However, they are quite different.In order for money to be made in a stock investment excluding collecting a dividend, you will have to make a trade to lock in your gains or to cut your losses on a stock that fail below the initial stock price that it was purchased. Both will buy and sell stocks, but how they decide to do it is how the stock investor differs from the stock trader. Stock trader is a person who I compare to a sprinter, and the stock investor is the marathon runner.
My philosophy behind my blog 6446 Rules is teaching the techniques and basic principles of stock investing used by the marathon runner or stock investor. However, it is important that everyone understand the numerous ways to make money using stocks and this includes trading stocks. The stock investor buys a stock based on the good fundamentals of a company. Investor usually conducts a fundamental analysis on a company’s balance sheet, cashflow statement, and an Income statement to determine if the company is worth making an investment in its stock. The intent of the stock investor is to use the certain stock philosophy such as buy and hold. Therefore, you buy a stock with the hopes of its stock price increasing value as it is held in portfolio over period of time. Your intent is to hold it as long as the stock still fit the parameters of your investment strategy. Holding the stock is usually for a long period of time. Buy and hold does not mean you buy a stock and forget about it. If you need to sell a stock when it is doing poorly or to take advantage of big increase in price to gain some profit then you do it. The stock investor is about knowing the company’s financial condition. You select stocks based on how well the company financial conditions are and if it fits all parameters of your investment strategy. For example, an investor may use value investment strategy to determine what stocks to buy and when to sell.
The stock trader or the sprinter is more interested in how a stock’s price moves up or down. Their strategy will involve a lot more technical analysis. Technical analysis is studying the supply and demand of markets. Henceforth it leads finding trends of how stock price will move because stock price is greatly influenced by supply and demand. The use of charts reflecting movements in stock price over a period of time are used in technical analysis and it will influence what stocks the stock trader purchases and when stocks should be sold. For example, they may buy a stock only to hold it for an hour, because their trading strategy and charts dictated for him or her to sell the stock in an hour. The stock trader is not connected to how well the company is doing. Their concern is the stock price and will it increase in price immediately or based on charts of the stock price’s movement.
Money can be made both as a stock trader and investor. You will need to open an online trading account. Many traders may dabble in the options market that is another post for the future. Every once awhile you see some trading philosophy, but it is about the beginning investors and teaching investment strategies. As you get more comfortable, you will step into the realm of trading stocks. However, an education is incomplete if you do not know all aspects of how to make money in the stock market. Knowledge will provide you options on how best to use stocks to your advantage.