Trader Vs Investor

There are a lot of people out there who thinks they are investors but apparently they aren't. There are two categories for people who buys stock:

1.Trader

2.Investor

The philosophy behind these two categories are different. While there is no doubt both groups can make profit in the stock market, by knowing where you stand, you will improve your chance of making more profit.

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A trader is one who buy a stock and sell it within a short amount of time to make a quick profit. They are usually day-trader or swing trader. Traders usually rely on the momentum and "ride the waves" to make their profit.

.A day trader focuses on trading in an intraday basis while a swing trader holds on to their stock for a little bit longer, usually from a few days to a few weeks. The techniques used by traders in their stock selection is mainly technical analysis with a little bit of fundamental analysis. Technical analysis is used by predicting the price movement of the current stock based on the past action and indicators. While technical analysis may not always be accurate, an experienced trader will know to set stop-losses in case things go wrong.

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On the other hand, an investor is one who buys and holds for the long term. People such as Warren Buffett and Peter Lynch are investors. Their stock selection is based on the company's financial condition rather than the price momentum used by the traders. Investors focus on analyzing a companies balance sheets, income statements, and cash flow to determine if a company is worth investing in, such an analysis can be called fundamental analysis. Once an investor has selected and purchased their stock, they will hold on to it for many years. They will ignore the fluctuation of the prices in the short term basis because based upon their analysis of the company's condition, they know that the company is growing and the stock price will eventually be match the value of the company in the long term.

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There are two types of investors, however, value and growth investors. As their name implied, a value investors hunt for bargains. They search for good companies whose stock price has been driven so low that its price is much less than the value of the company. Value investors would invest in these companies and wait for the price to finally catch up to the value of the company. Growth investors, however, looks for company that are growing at an extraordinary rate. Their philiosopy is to invest in companies whose expansion and future prospects looks very bright despite the prices of their shares, because they know that if a company is in good condition and its stock price will be higher as the company grows in the long run.

. So we have covered when traders and investors buy their stocks, but when do they sell?

A trader will sell their stocks as close as possible to the peak to make the most profit. They use techinical indicators such as support and resistance lines and various other pattern to tell them a stock price will cease to climb soon and its better to sell. An investor will hold on to their stock until they find out the company they invested in has ceased to grow, in which prices will cease to grow as well, or when the prices of the stock became overpriced compared to the value on a company.

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So now that you know the two differences, find out which side you stand on and research into the techniques and skills used by the type you are in to improve your profit from the stock market.