Stock Trading Vs. Investing: What’s The Difference?

Both activities, stock trading and investing, focus onprofit-making. In simple terms, stock trading makes a profit in the short termwhereas investing is known for long term gains.

Trading

Trading involves buying and selling of stocks regularly thatbrings short term profits. Traders buy shares at a lower price and make profitsby selling them at a higher.

Trading styles

Following are some of the types of trading:

1. Day Trading or Intraday Trading

Intraday trading is popular as the most active trading style where stocks bought and sold within the same day. Traders do not hold positions even for a night. Positions are squared off on the same trading day. Most of the professional traders who are known as market makers adopt this trading style. Novice traders are suggested to stay away from this style.

2. Position Trading

Position trading is a buy-and-hold strategy, unlike daytrading. It involves determining the market trend and direction at presentusing daily to monthly charts of the market and other methods. Do not mix theprice level and direction here. It is a long term trading. Traders are aimed atgetting benefits from both the upside and downside market movements. Duringhigh volatility in the market, trend trading is more difficult.

Position trades are usually held for several days or longer.Traders with this style are known as Trend traders.

3. Swing Trading

Swing trading is a technical trading style comprising abigger picture of trends. Swing traders are required to set trading rules oralgorithms based on technical or fundamental analysis to cope with the pricevolatility and to identify when to purchase and sell a stock. It involves analyzing markets as well as individual movements. Investors holdsuch trades for more than a day but for a lesser time frame than trend trades.It is short-medium term trading.

Swing traders execute a trade when a market moves in onedirection. They cannot trade in a sideways market. They keep on checking themomentum whether it’s increasing or decreasing.

What is Demat Accountand Trading Account?

Demat account andtrading account are brokerage accounts which are required to participate instock market trading. Demat account charges vary from broker to broker. As a trader, you needto find a proficient broker to open demat and trading account. It is advised tocheck the integrated trading platform provided by a broker while opening atrading account with a broker. Bajaj Financial Securities Limited tradingaccount is one of the best brokerage accounts as it allows you to save onbrokerage costs by charging a flat brokerage rate per trade.

Investing

Investing is a dynamic and long haul concept with an enormousvariety of possible assets to invest in. An investor needs to create aninvestment portfolio before investing and be prepared for the long race. Timeis the best companion of an investor.

There are many investment tools and different asset classesthat an investor needs to understand and distinguish before starting investingso that he can make significant profits in the long run.

One of the investment instruments is stocks. One can investin stocks through ETFs, mutual funds and more.Stocks are one of the viable options to grow funds in a longer timeframe.

Direct investing inStocks

Investing directly in stocks requires enough knowledge andexpertise as well. Analysing a company’s potential, choosing the right stock toinvest, stock valuation, following sectoral trends, creating a portfolio aresome of the sectors to be considered before investing. Direct investing has notax benefits for investors.

Through Mutual Funds

If you do not want to invest directly in the stock market,you can choose mutual funds. A professional fund manager will invest on yourbehalf as per your investment goals. They are experts in research and analyzingresearch reports of various research organisations. Mutual funds provide thetax-saving benefits under the section 80C if you invest through ELSS Scheme.The main advantage of mutual funds is that your funds are allocated acrossvarious stocks. In case one or two stocks have not performed well, the otherswill generate returns for you.

Through Exchange-tradedfunds (ETFs)

Exchange-traded funds (ETFs) and mutual funds are alike. ButETFs are listed on stock exchanges and you can trade in ETFs throughout theday. You can notice a drastic change in its value.

Trader Vs Investor:Outlook and Perspective

Here is a comparison of trader vs. investor’s outlook:

  • Traders experience higher risk along with apotential for higher returns as compared to investors.
  • Traders have a short-term outlook. They buy andsell stocks within weeks, days, even minutes. Whereas investors buy and holdstocks with the perspective of long term profits. Investors hold stocks evenwhen the market goes through the ups and downs.

Traders keep an eye on every little movement ofstocks. They are experts to find out the way to make profits from smallmispricings of stocks. They adopt short term strategies. On the other hand, acompany’s long-term growth and the stock value, in the long run, are the fieldswhere investors spend their ti

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