August 17, 2021

Trading and investing: how are they different?

Think of two Olympians. One of them runs at a constant and comfortable speed. Instead, the other alternates between faster times and more relaxed times during the race. Who will win? It is difficult to predict, because both strategies are valid and effective. The same goes for trading and investing.

Trading and investing are two approaches to investing money in the stock market with the intention of making a profit. Normally, both terms are used to refer to the same thing, but there are certain nuances that make them different.

Neither is more recommended than the other. You should lean towards one of them, depending on your level of experience, as well as the time you have to dedicate to this activity.

Is trading and investing something that interests you? Start by train you properly (80% discount by applying the code BENOWU40 in the shopping cart) and keep reading this article to find out which method you should decide on.

Invest in the stock market

When we talk about investment in the stock market, we must talk about the long term. Investing in the financial markets refers to operating with a long-term perspective, and it may even be years. That is, it means buying assets and holding them during the ups and downs that arise in the market until you reach your financial goal.

Investment strategy

One of the keys to being successful investing is patience. Since the long term is inevitable in this type of strategy, as an investor you will have to wait even years to get the best return.

But beware! Every investment involves risk. The market is volatile and prices are constantly fluctuating, so don't expect to generate a positive return every year. 

In addition to patience, another factor that you must take into account, since it is important to control, are your emotions. Making rash decisions can lead to outright failure.

And remember, diversification is a great investment strategy. It is about investing in different countries, sectors and assets. Making this distribution reduces the risk, since you do not depend only on a specific market.

Invest in for yourself?

Think about investing if you think you have little time in your day to day to do other activities in addition to your professional and personal tasks. Investing will not require you to be aware of what is happening in the markets on a daily basis. In this case, perhaps the previous dedication to determine well in which assets and markets you want to invest is more important.

Likewise, and although performance is never guaranteed, fundamental analysis is very useful when it comes to studying the value of assets, as well as the economy, facts that will help you make better decisions.

What is trading?

It is about operating in the short term in order to increase the return on investment, since the return is usually higher.

In trading, the short term that characterizes it is due to the fact that transactions can be immediate, lasting only minutes, up to transactions of days or months, but no more. Traders, in this case, buy and sell Forex, commodities, stocks, etc.

Types of trading

Traders differ in their trading style and the length of time they normally keep their trades open. Thus, we make the distinction between 4 types of trading:

  • Position trading, when the operation stays open for months.
  • Swing trading, which involves keeping trades open for days or weeks.
  • Day trading, which keeps an operation open throughout the day, but not overnight.
  • Scalping trading, mode in which the operations remain open for only a few seconds or minutes.

Trading strategy

Traders are always looking to make a profit in a short period of time, so they closely and constantly follow the movements of the market. In this case, professional traders use technical analysis to study assets and forecast the market price trend.

Likewise, in trading it is key to make use of certain orders, such as Stop Loss, an order that will allow you to determine the purchase and sale price of the asset.

Is trading for you?

Trading takes great dedication and active participation in the market. If your thing is to be sitting in front of the computer and you enjoy investigating the different assets available, as well as the movements of the market, trading is totally for you.

Always remember that short-term trading also has its risks and positive returns are never guaranteed.

Trading and investing: conclusion

Trading and investing are two different ways of operating in the financial markets. Think first about the objective you want to achieve, whether it is profitability in the short or long term.
Whatever strategy you decide on, the first thing you should do is lay some theoretical bases on trading and investing. Afterwards, have an established plan, patience and control your emotions. There may even come a time when you prefer to combine both strategies to make the most of your profitability.

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