Do You Know The Difference?

Introduction

Stock Trader and Stock Market Investor are misunderstood terms as evidenced by the fact that they are often used interchangeably. Traders make investments and investors make trades. So is there really a difference. Yes there is and you’ll learn the difference by the time you get to the end of this webpage.

Whether you’re a true beginner or you’ve been trading for a number of years, you may have never come across the question posed in the headline above. It’s an important question because it’s critical that each person know themselves and how they are or will approach buying and selling stocks. The question is bigger than labeling yourself as a stock trader or a stock market investor. For that reason, this webpage will cover two important issues, namely:

1. Five Trading Styles
2. Are You A Trader Or An Investor?

Five Trading Styles

The five trading styles are:

1. Long term investor
2. Intermediate term investor
3. Position trader
4. Swing trader

5. Day trader

Some people use different terminology but these five styles are commonly used.

Long Term Investor can be described as follows:

• They generally hold their stocks for more than 1 year before selling them.
• Focus primarily on the fundamentals of the company before committing to buying the stock. The fundamentals mainly concern the company financial statements.
• Since their commitment is long term, they seldom check on the stock price more than once-a-week.
• They pay close attention to the economy and stock market trends.

Intermediate Term Investor — can be described as follows:

• They generally hold their stocks for 6 months to 1 year.
• Focus primarily on the fundamentals of the company before committing to buying the stock.
• Since their commitment is long term, they seldom check on the stock price more than once-a-week.
• They pay close attention to the economy and stock market trends.

Position Trader — can be described as follows:

• Position trading is most effective when the trend of the market and the trend of a stock discontinues an upward trend, begins moving in a sideways trend, and then returns to its upward trend.
• Position trading is also effective when the trend of a stock discontinues an upward trend, begins moving in a sideways trend, and then becomes a downward trend.
• Consider both the fundamentals of the company and a technical analysis of the price history of the stock.
• Position traders generally buy their stocks when the stock prices breaks out of the narrow trading range to the upside.
• Position traders generally hold their stocks for 3 weeks to 12 weeks, as long as the price continues moving higher.
• They generally watch stocks that are in a sideways consolidation pattern. They purchase the stock when it breaksout of this pattern to the upside.
• This is considered by some to be an excellent trading style for beginners or very busy people with limited time availability.

Swing Trader — can be described as follows:

• Swing trading is most effective when the trend of the market and the trend of a stock is moving upward.
• Swing traders generally find stocks worthy of investment through stock scanners or stock screeners.
• Their primary focus is on technical analysis.
• Swing traders generally spend time each day looking at the price performance of their stocks and looking for scans or screens that might identify new trading opportunities.
• Swing traders generally hold their stock for 3 to 10 trading days.
• Swing traders generally check the news early in the morning and then enter their buy order in the morning before the market is open.

Day Trader — can be described as follows:

• Typically hold their stock for less than 1 day
• All stocks they buy during the day are sold prior to the end of the day
• They have real-time access to stock data
• Generally stay at the computer throughout the day until all of their open positions are closed.

Note: I do not recommend Day-Trading for beginners and I do not teach it to any investors because of the risk.

Are You A Stock Trader Or Long Term Investor

From the trading style descriptions above, you’ve probably already realized that:

• Stock trader is a term generally applied to people that are buying stocks with the intent of holding them for a very short time to take advantage of short term moves in the price of a stock.
• Traders buy stocks they believe can be sold to someone else at a greater price within a period of 3 months.
• Investing is a term that generally applies to people that hold their stocks for a minimum of 6 months.
• Investors buy stocks they consider to be under-valued with strong potential the market will recognize their true value and drive the price upward.