trading vs investing.Which one is better

When you enter the world of the stock market you will see three types of people one is investor, second is trader and third spectator. Spectator just watches the stock market. Traders and investors have only one motive in mind i.e to earn money from the stock market but the way they both try to earn money is quite different.
Traders try to take profit in the short term which is either weeks, days, hours and even minutes whereas investors try to take profit in the long term. In this article, we will discuss what traders and investors try to see for making a profit in the stock market and compare both of them.

TRADING: Traders watches the chart and apply various indicators to know when to enter the trade and when to exit the trade. They are not concerned about the management of the company or financial statements of the company. Traders plays with the sentiments of the market and book their profit. The person who wants to be trader should keep in mind that trading does not always go as they thought, they might get loss so they must know how much loss they can bear and should exit the trade no matter what. They should come with a game plan to know about everything they are looking for trade. Emotion is something which should not come while trading.

    

INVESTING: Investors investing for long terms are concerned about the company management, market share, financial statements etc. They look for companies that are below their present value. They try to find the real value of the company and its worth in future using various techniques and formulas. One of the technique is the dividend discount model. Investors are least concerned about the short term analysis and what is happening to the price of the stock in the short term.  Investors look for the time value of the money. The person who wants to become an investor must learn how to read financial statements and how to know about the management. If you don’t do the analysis correctly then you can lose your money in the long term so it’s important to do the analysis correctly.

CONCLUSION:

Even though trading and investing are quite different in terms of timing and tools we use. It is quite hard to choose which one is better as in the real world both of them have shown results. One thing that one can say is that it is always good to use them both as you will then get the upper hand. In technical analysis traders sometimes use financial ratios and also analyses the company for making their strategy. Sometimes investors see that they can book short term profit based on technical analysis. 

Hope you like the article. Comment below about what you think is better trading and investing. Which one will you choose?.

BASIC ABOUT STOCK MARKET

Basic about stock market : what is stock? How can one buy/sell share? Different types of markets Different types of analysis

Read the article full there is a bonus point for the readers at the end of article

What is stock?

Stock(or share) is a type of security that represents one ownership in a company.When a person is buying stock he/she is buying a small piece of company.The amount of piece owned by a particular shareholder depends upon the amount of shares owned by the shareholder relative to the amount of shares outstanding.

A company issues stock when it want to raise money for growing its business and by owing a particular share a person is participating in company’s growth and will make money through the growth without even putting in work.

How can one buy/sell share?

Public companies sells their shares through stock exchanges like BSE and NSE .A person can buy/sell a particular share on the exchange on it’s own with the help of stock broker.The price of the stock is managed by stock exchange with the help of supply and demand.The stock exchange also act as a guarantor of settlement.

A stock can also have private sales but it is very difficult to know the price and also to find the seller/buyer.

DIFFERENT TYPES OF MARKET

                                           

There are two types of market

1.    Primary market

2.    Secondary market

1 Primary market : A primary market is the market where the issuance of new security happens.When a company sell new stock and bond for the first time .It helps the company to raise money directly.

2 Secondary market : A secondary market is the market where the security is sell/brought between investors.Here the securities are exchanged which are previously issued.It helps in providing liquidity to the investors as they can easily buy or sell security they own

 

So the particular difference between primary and secondary market is that In primary market company raises the money whereas in secondary market shares are exchanged between investors the company gets no money with increasing the price of security.

DIFFERENT TYPES OF ANALYSIS :

There are two types of analysis

1.       Fundamental analysis
2.      Technical analysis

                      

1 Fundamental analysis :  This type of analysis is done for long term investment.Fundamental analysis is done by collecting the financial statements and doing research on it for finding the true value of the company and future value of company.The main aim of fundamental analysis is to know everything about the business before investing

2 Technical analysis : This type of analysis is done for short term investment .In this analysis the trader analysis the supply and demand of the stock and based on that he/she takes the decision.This is done by collecting various data using charts,momentum,price variance etc.This type of analysis has nothing to do with fundamentals of company.

Now as I said that there is a bonus point at the end

To know that whether the market is high or low , it's impossible to check each stock price so you just need to see the stock index.So just by looking at the index you will be able to know that whether market is high or low

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