Are investment and trading different from each other ?

By investment it is meant that buying or selling a security specifically for a longer time period (several years).While investing an individual allocates his money as best as it is possible for him and further does not have to bother about daily fluctuations.

On the other hand trading means buying and selling securities for specifically short time period(less then few months). To gain benefits traders make use of trading systems and other techniques to learn optimum short term trading patterns.They can also take help of discount brokers.

Following are some major difference between investing and trading :

1)Trading is done with primary motive of earning quick profit in short term basis. Investment is done for capital appreciation over a period of time may be few years.

2)A trader usually square off his positions on stocks he is holding in order to limit his losses.Investors buy more stocks as ultimately his returns will be growing .

3)Traders are more focused towards frequent buying and selling of securities as they believe there is short term advantage in doing so.Investors are more focused towards company's performance on long term basis and what returns it is likely to generate over a specific period of time.

4)Traders are more reliable on technical charts and trading systems to pick their stocks and decide an optimum trading strategy. Investors gives more emphasis on fundamental analysis of company's performance in whose stocks they are investing.

Now the question arise that should an individual become a trader or investor :

Choice is simply yours. Trading demands for time and good analytical skills. Traders have to give time in researching about stocks, learning their price fluctuations timely. However it also offers an opportunity to earn money over a short period of time. Investing requires more research of the company in which you are investing it may takes months to research on that. But here frequent buying and selling is not required. Depending on ones need from the stock market an individual can choose between investor and trader.

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