THE CONTRAST BETWEEN TRADING AND INVESTING

I recognized that a lot of people tend to utilise the word “INVESTING” and “TRADING” interchangeably without giving it applicable thought as to what each entails, I don’t know what exactly sources this misperception. Nevertheless, I feel that there is some fundamental dissimilarity between these two activities or processes. It is a fact that the two supplement each other yet that does not mean they are tantamount.

If at all you were among those that thought Trading is synonymous to investing you do not have to worry to any further extent my friend, This Blog Post is a special dedication to you!

When we talk of TRADING we are talking of a process of bargaining one item for another. In financial markets this involves either buying items for one price to sell them at a higher price or selling something for one price and buying it again for a low price all in the name of profit making.

A lot of people engage in “TRADING” activities of different forms in their day-to-day lives but they are just not aware that it is “TRADING”. Usual instance is that of buying Goods in a store and in the process we interchange Money for Goods. That is a trade-off! But my assessment will be mostly grounded on the cybernetic type of trade.

Contrariwise, INVESTING entails of purchasing and possession of financial instruments with the confidence that the instruments will upsurge in value with time and this is branded the “Buy and Hold” concept! Therefore investors tend to buy low and sell low. They keep the instruments with the hope that the price gets higher in the future. Traders on the other hand are not concerned about the “Buy and Hold” of financial instruments. Their main goal is to profit in whichever way the market goes whether upward or downward within a shorter time frame.

A lot of investors tend to confuse Buy and Hold with the Buy and Forget hence losses become inevitable.

Yet, serious investors buy instruments based on the underlying ultimate reasons such as the background of a company, company’s status, prospective of its Products and earnings reports. While in TRADING high probability setups acquainted by technical analysis are the greatest valued key tools as they incorporate MARKET SENTIMENT.

This is all I could offer you, Stay tuned for more and don’t forget to FOLLOW my Blog!

 

Yours Visionary

Lesego Montsho

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