Are You an Investor Or Trader?

By KP Yang

Have you ever asked yourself if you are an investor or a trader?
Both investor and trader have a common objective. That is to make money out from stock market.
Then, what is the difference between them?
Investors view stocks as an asset and partial ownership of a company. They are market participants who is looking for capital depreciation and dividend pay out as the company grows. Usually, they do nothing after owning the stock and hope that that stock price will grow as anticipated or to give them a hefty dividend.
Investor tends to do more analysis on the fundamental of the company, they look for the financial performance in details. They can dig into the ROE, PE ratio, debt exposure, cash flow and even the management. They are usually prepared to hold the stock for a longer term.
Investors usually are not worried so much by the day to day market volatility. Instead, they are more interested in the quarterly, half-yearly or annual report to know how the company progresses.
Let's take a look at the trader.
Traders view stocks as an inventory and they run it like a business. They are market participants who is looking to profit from the price difference in market volatility. They will start buying the stock as inventory holding during an up trending market and start unloading their stock as the price moves higher. Similarly, they can start selling the stock first and then replenish the stock inventory at a later date when the market is bearish.
A trader cares more about the market sentiment more than the company. Trader tends to do more analysis on the stock price pattern, the trend, the market sentiment or market psychology. They look at the market as a business place to fulfill both the demand and supply and eventually profit from it. Trader usually tends to hold the stock for a shorter period, which can vary between hours to days to months. Usually trader are not prepared to hold stock for years.
Trader likes to have market volatility because that creates price difference for them to profit. Usually, they follow more on the majro economic or business news and like to analyse chart.
Having know the difference between investor and trader, which one would you like to be?
KP Yang is a private trader are passionate about invest and make money in the stock market. He also enjoy using technical analysis to study the market trend and formulate trading strategies based on TA. He shares his view on the market on his blog at: http://www.investmoneylab.com - "There is NO Secret Ingredients. That's just YOU" - Kungfu Panda. He believe practice makes perfect, everyone can be successful in the stock market by constantly learning, practicing and taking action.
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