Choose to be a trader or investor? This Is The Difference Between Both
Trader or Investor, often the two terms are mistakenly used by people who mention it. For example, there are many forex market players or stocks who consider themselves as an investor. On other occasions there are those who claim that they are a trader.
The term trader or investor is often regarded as something that is the same and does not differ from one another. They assume that a trader is an investor as well because they have invested a number of funds. Likewise with an investor who is a trader also because they will definitely do trading transactions. Even though the above understanding is not right, because the understanding of traders and investors has a considerable difference.
In the world of investment, trading and investing activities are two activities that are clearly different, even though a trader and investor have in common that is to enter the market. A trader and investor have different perspectives, ways of working, and strategies, even though their goals are the same which is to benefit from the activities they do.
As a step to improve the error of the two terms above, this time we will discuss the differences between investors and traders.
What are the differences between Traders or Investors?
This is a further explanation for all of you.
Understanding of Investors
First we will discuss with you all related to investor understanding. In the world of investment in general, which is included in the category of investors are people who put their funds into long-term investment instruments. These commonly placed investment instruments include real estate or property, large and small scale industries, investments in commodity markets or stock markets with the intention of being detained for a long time.
When going to invest in a field, an investor certainly has a basis of consideration.The basis for consideration that an investor has is to focus on the product they will buy or the type of business they will enter. For example a stock investor who will start to invest, then he will choose a company that really has a pretty good performance.
This means that an investor has a truly mature consideration before they decide to enter and start investing in a field.
In classification, an investor is divided into two, namely institutional investors and also individual investors. Institutional investors include banks, financial institutions other than banks, insurance companies, and so on.
While individual investors usually rarely have a clear plan if one day the investment results are losing money. Individual investors have a tendency to cut-loss and switch to other types of investment instruments when they get losses. It could also be that they will let the investment in the hope that its value will rebound and can get profit in the future.
The bad attitude often shown by individual investors is that they often respond to changes in market prices with anxiety and anxiety. For example, when gold prices are decreasing which often occur in each period, individual investors who have a large gold investment value will feel anxious and worried. They are worried that they will get losses from the investments they make.
Even though not all types of individual investors have this attitude. There are also individual investors who are very serious with sophisticated and mature investment planning and strategies. So they can get greater results and sufficient profits for life.
One example of an individual investor who gets success on his investment is Warren Buffet. Due to his tenacity and ability to conduct analysis and investment skills honed since adolescence, he is one of the individual investors who are among the richest people in the world.
Thus being an individual investor is very wide open to make you a rich person and have a lot of wealth.
Definition of Trader
From the explanation above you understand that an investor is very focused on the fundamentals of the product they are going to buy. On the other hand, a trader turns out to focus on the sentiment and market conditions that are happening.
For example, a trader who trades on the stock market does not really care about the performance of the company’s shares they will buy. As long as the market sentiment for the company shows a positive thing, then he will buy the stock for later resale in a fast time.
In addition to sentiment, other things that traders consider are the existing market conditions. If the stock market is hit by a political environment that is not very conducive so the stock price index falls, the trader will not enter the market until market conditions return to normal.
When compared to an investor who conducts transactions over the long term, a trader conducts transactions in the short term and has a much greater frequency than investors.
A survey has been conducted to find out the trading patterns that are carried out, the result is that most traders rely on their income only from trading or the term trading for living both in the stock market, futures stock index, forex and also commodities .
In general, a trader has a very clear and directed method, strategy and plan. This is important because they usually cannot hold trading positions for a long time.
These traders take advantage of stop loss, profit targets, and certain risk / reward ratios with a view to limiting the losses they can receive and also to adjust the benefits to be gained. In addition they also use techniques in money management with the aim of maximizing profits that may not be used by investors.
A trader who is expert and skilled will enter into existing types of markets such as forex markets, stock markets, commodity or futures markets. One example of a successful trader is George Soros who was the founder of Quantum Funds and became one of the most successful world-class traders.
Difference between a trader or investor
From the explanation above, we can conclude that there are some differences between investors and traders which are quite important. The first difference is that investors have a focus on the fundamentals of an asset that they will invest, while a trader has a consideration of market sentiment and conditions before they enter and trade.
The second difference is a trader has a tendency to make transactions in the short term, while investors have planning and investing in a long period of time.
Hopefully an explanation of the differences between Traders or Investors can add to your knowledge.