When it comes to generating wealth in the stock market, trading and investing are the two options. Both of them have a different set of approaches and are completely different from each other. In this article, you will learn about the main differences between trading and investing.
Difference Between Trading and Investing
Trading is a way of transacting in stocks and keeping them for the short term. Traders look to book short term profits. The holding period of trading can be one day or a week. On the other hand, an investor follows the principle of buying and holding the stocks for long term.
Both trading and investing have their own set of risks. In trading, the risk is of daily or short term fluctuations in the stock price. Whereas investing has the risk of making an investment in a bad company leading to loss in the future.
Art vs. Research
Trading is an art and not everyone can do it. Trading requires a good reading of technical charts and graphs. On the other hand, investing requires good fundamental analysis of stocks before making a long term investment in a stock.
Growth of Capital
Trading is enhancing the capital by looking at the market trends. If the price of the stock is going higher, the trader may sell the stock. Therefore, trading is about timing the market correctly. Whereas, investing is about growing capital through compounding interest and earning dividend on quality stocks by holding them for long term.
The above points are a few differences between trading and investing. If you want to become a successful or full-time professional trader in the stock market, you can join Nifty Trading Academy. We are the leading stock market education provider in the country with the best faculty. To reach us you can drop us an email or call us.