Stock Trading Versus Stock Market Investing
Perhaps one of the most misunderstood, but fundamental, truths about the stock market is the difference between stock market traders and stock market investors. These two strategies are completely different, based on different personalities, analytics and tactics. However, many would-be investors’ use the terms interchangeably, and as such, may be confused as to why taking advice from one and the other always proves unsuccessful.
Which is better investing or trading?
Stock traders are short-term traders who don’t care about the long-term movements of a company, or even the health of a company. A stock trader is mostly concerned with making profits for a few seconds to several weeks. The strategy is to replace market makers as sellers to retail investors.
The main competition for stock traders is market makers, namely institutional investors or investors who buy securities packages directly from the company and sell them to retail investors. The market maker stock liquidity is what keeps the market liquid at any given time, and the market maker is the entity that stabilizes the current share price. Market makers are highly experienced traders with the latest in automatic computerized technology.
A successful stock trader seeks to cut the market maker off some of his shares and sell them at a profit to a retail investor first. This can be done in seconds or over weeks by a method known as swing trading. Successful stock traders can read charts and parse reports instantly, and usually have access to the most recent of each.
Which is better share market or stock market?
A stock market investor does not qualify himself with a stock trader’s deal. Stock market investors are interested in finding good companies to invest in over a period of months to years, and are not worried about the short-term moves of market makers and stock traders seeking short-term profits.
To be a successful stock market investor requires more research and proper analytics than technology and speed. Get ready to check out the companies you like by reading their 10-K and 10-Q reports, listening to investor calls, and following the company’s investor relations peers. A successful stock market investor usually chooses an industry in which he has some experience so he can better describe the data he receives.
To be a successful short-term or long-term investor usually requires choosing one strategy over another and sticking to it. Becoming a stock trader requires speed and the latest technology. Becoming a stock investor requires research and dedication to analyzing data. The middle ground is not human land, and the sooner you choose one side or the other based on your personality and resources, the better off you will be.