InvestorQ : How is trading different from investments?
swati Bakhda made post

How is trading different from investments?

Answer
user profile image
Niraja Mehta answered.
2 years ago


Trading can be for intraday or it can be for a short period of time. Normally, anything for holding more than 1 year is considered to be an investment although actual long-term investments are for more than 5 years. That is when investments generate returns. The fundamental difference is that trading refers to short-term buying and selling of shares whereas investment refers to long-term buying of shares. A trader normally tries to churn the money rapidly whereas the investor tries to buy a good stock in the sharemarket and waits for the stock price to appreciate.

A trader will always trade with a stop loss and profit target so that the funds can be churned at short notice. An investor does not give too much credence to a stop loss and gives more importance to opportunities in the market. Traders typically use the power of charts and technicals to take a view on the markets. On the other hand, the investors prefer to focus on fundamentals of the stock and do not give too much credence to technical charts except for timing their entry.