By Norman Rimluck
When choosing a path of a Trader, there will be different strategies one can focus on that will produce the best results. The main common schools of thought when deciding a path is should I be a Trader or Investor? Obviously there are different strategies that use different types of strategies and it's best to find one that is best suited towards your personality style.
We know someone choosing trading over being an investor definitely has a different time frame; this time frame is usually known as being much smaller then what a traditional investor looks at when making an investment. When a trader purchases an investment, his purchase is usually referred to as placing a trade as opposed to making an investment. The minor change as we know is such a small change in vocabulary that it's hardly worse even paying attention to, but the returns and how you go about placing a trade are huge. A trader is left with asking what's better. What works? What makes the most profit? Would I be better off with going with a more long-term approach? Isn't this considered day trading, I've heard nothing but negative things about losing all your saving from day trading.
Let us compare the two methods of trading over investing and hopefully we can offer some advice and suggestion to help you choose a strategy that's best suited for you.
There is a distinct difference between someone choosing to go into trading over someone who looks to investing as a better way to approach the market and making money. After all, isn't that we're all after? We want the financial freedom to do what we want when we want, while having the choice of where we choose to live while we go on these adventures of ours? OK, Sorry, I guess that was a tangent... Back to the topic at hand; the main difference over the two is the time frame and methodology used. Investing requires a much longer time frame than trading, anywhere from days, to weeks, even months to years. It's not been unheard of for people to hold their investments as even for an entire span of their life while passing it on into the wills. Trading on the other hand is more a purchase you make that day with the intention of holding onto it no longer until the end of the day. At the very max, a trader might hold it a few days and this is only if he fell that it's extremely profitable.
Even though the time frame is different, the general strategy of choosing the right thing to put your money into remains the same. It's pretty obvious you usually you want to select a good company that will not go bankrupt the next day you purchase it. You will also want to analyze the fundamentals of the companies, make sure it is in good financial health and has a competitive advantage relative to other companies in the industry. While they both may make money over time, a trader can make a lot more money in the long run, because he is taking advantage of the ups and downs, if he is doing it correctly, where the investor is in it for the long term, and rarely gets in and out of the market. Traders use a slight different analysis when choosing their investments that investors usually don't pay too much attention to. Their main tool is referred to as technical analysis. If you've ever been to a arcade and all the kids seem to line up to get their chance to play the big, shinny, noisy game, well a traders arsenal of technical analysis can closely compare.
On the other hand, an investor is one who buys and holds for the long term. People such as Warren Buffett and Peter Lynch are investors. Their stock selection is based more on the company's financial condition rather than the price momentum used by the traders. Investors focus on analyzing companies' balance sheets, income statements, and cash flow to determine if a company is worth investing in. Their main analysis is referred to as fundamental analysis.
Is all this too much to take in? We hope not. We wanted you to just get your toes wet with all the concepts someone going into trading has to be prepared for. In our next article, we'll go into a deeper look of what really separates technical analysis over fundamentals.
Learn more about the various aspects of the market at http://finance.yahoo.com/ and at https://www.fidelity.com/
Norman Rimluck has been an active trader in the markets for over 30 years and holds a MBA in Mechanical Engineering. He worked for over 20 years as an Engineer. He started looking into trading the Market with the use of [http://priceactiondaytrader.com/]Price Action after a good friend of his invited him out and gave him his first trading book. The book 'Trade the Markets,' which made him quit his job 2 years later and never look back. He just started his own website where he discusses various aspects of the market. You can read more by visiting http://priceactiondaytrader.com
Article Source: http://EzineArticles.com/?expert=Norman_Rimluck
http://EzineArticles.com/?Getting-Into-the-Day-Trading-Game&id=7306801
When choosing a path of a Trader, there will be different strategies one can focus on that will produce the best results. The main common schools of thought when deciding a path is should I be a Trader or Investor? Obviously there are different strategies that use different types of strategies and it's best to find one that is best suited towards your personality style.
We know someone choosing trading over being an investor definitely has a different time frame; this time frame is usually known as being much smaller then what a traditional investor looks at when making an investment. When a trader purchases an investment, his purchase is usually referred to as placing a trade as opposed to making an investment. The minor change as we know is such a small change in vocabulary that it's hardly worse even paying attention to, but the returns and how you go about placing a trade are huge. A trader is left with asking what's better. What works? What makes the most profit? Would I be better off with going with a more long-term approach? Isn't this considered day trading, I've heard nothing but negative things about losing all your saving from day trading.
Let us compare the two methods of trading over investing and hopefully we can offer some advice and suggestion to help you choose a strategy that's best suited for you.
There is a distinct difference between someone choosing to go into trading over someone who looks to investing as a better way to approach the market and making money. After all, isn't that we're all after? We want the financial freedom to do what we want when we want, while having the choice of where we choose to live while we go on these adventures of ours? OK, Sorry, I guess that was a tangent... Back to the topic at hand; the main difference over the two is the time frame and methodology used. Investing requires a much longer time frame than trading, anywhere from days, to weeks, even months to years. It's not been unheard of for people to hold their investments as even for an entire span of their life while passing it on into the wills. Trading on the other hand is more a purchase you make that day with the intention of holding onto it no longer until the end of the day. At the very max, a trader might hold it a few days and this is only if he fell that it's extremely profitable.
Even though the time frame is different, the general strategy of choosing the right thing to put your money into remains the same. It's pretty obvious you usually you want to select a good company that will not go bankrupt the next day you purchase it. You will also want to analyze the fundamentals of the companies, make sure it is in good financial health and has a competitive advantage relative to other companies in the industry. While they both may make money over time, a trader can make a lot more money in the long run, because he is taking advantage of the ups and downs, if he is doing it correctly, where the investor is in it for the long term, and rarely gets in and out of the market. Traders use a slight different analysis when choosing their investments that investors usually don't pay too much attention to. Their main tool is referred to as technical analysis. If you've ever been to a arcade and all the kids seem to line up to get their chance to play the big, shinny, noisy game, well a traders arsenal of technical analysis can closely compare.
On the other hand, an investor is one who buys and holds for the long term. People such as Warren Buffett and Peter Lynch are investors. Their stock selection is based more on the company's financial condition rather than the price momentum used by the traders. Investors focus on analyzing companies' balance sheets, income statements, and cash flow to determine if a company is worth investing in. Their main analysis is referred to as fundamental analysis.
Is all this too much to take in? We hope not. We wanted you to just get your toes wet with all the concepts someone going into trading has to be prepared for. In our next article, we'll go into a deeper look of what really separates technical analysis over fundamentals.
Learn more about the various aspects of the market at http://finance.yahoo.com/ and at https://www.fidelity.com/
Norman Rimluck has been an active trader in the markets for over 30 years and holds a MBA in Mechanical Engineering. He worked for over 20 years as an Engineer. He started looking into trading the Market with the use of [http://priceactiondaytrader.com/]Price Action after a good friend of his invited him out and gave him his first trading book. The book 'Trade the Markets,' which made him quit his job 2 years later and never look back. He just started his own website where he discusses various aspects of the market. You can read more by visiting http://priceactiondaytrader.com
Article Source: http://EzineArticles.com/?expert=Norman_Rimluck
http://EzineArticles.com/?Getting-Into-the-Day-Trading-Game&id=7306801
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