ARE YOU AN INVESTOR OR A TRADER?
There are various types of stock market participants. Traders. Investors. Some are an investor and a trader at the same time. Majority of market participants clearly set their role through countless trainings and experience. But those who do both often gets in trouble by attempting to overdo it with little discipline.
Market participants must remember that risk tolerance and time frame can hinder them from having a successful outcome even though there is a room for investors for small shots in the dark using speculative trading positions.
So what is the difference between the two?
An investor is a market participant with medium-term to long-term horizon and modest level of risk tolerance. They are fine with moderate swings in their investment portfolio, granted it has various assets working with one another to achieve their goals. Conversely, a trader is more concerned with whereabouts of their specific niche. Traders may either day trade, swing trade, or try to time the market’s machinations on a short-term basis in order to reach profitable results. They frequently employ large cash positions, discipline, patience, and an understanding of risk dynamics when trading. Given their triggers or analysis, traders can jump in or out of the market at a short notice.
Discovering the group you belong is a good exercise in self-examination, especially the recent change in market stance, being pressed by experts or friends for making substantial changes in your portfolio. ETFs moving reversely to the market, using leverage, or following volatility futures are back in the game.
Frequently, investors endeavoring to act like traders tend to fall into uncertainty in case a position moves against them because they are not used to placing tight stop losses or have acquired a fast-moving stock or ETF they normally avoid. Aside from that, their timing of buying and selling is not right because they are overwhelmed with the psychological pull to be bullish in an upward movement or bearish in a downward movement. This can result in additional anxiety and woes complicating portfolio management decisions.
Are you an investor or a trader? Choosing between the two is not a matter of which is better or can make you generate more money. Each has its own benefits and downfalls a budding investor/trader must consider. One of the best strategies to keeping a steady relationship with your money is to stay on your path.
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