Stock Market: Trading Versus Investing

Investing and trading are two different techniques to gain from the stock markets. For those who are conservative and risk-averse in their approach to money, stock investing is the option. However, as someone who has the requisite knowledge and skills and is open to taking some risks, stock trading is the way forward.

Stock trading decoded

Stock trading is the process of buying and selling stocks in a short span to make profits. A particular trade gets completed once a trader buys a certain number of stocks at a certain price and then sells these stocks at a price, which could be greater or lesser than the buying price.

A trader needs to take a short-term position in stocks, which can range from a few seconds to a couple of months to complete a trade in a stock market. At times, the holding period of stock could be as short as a few seconds or minutes, such trading is referred to as scalp trading. Then some traders buy and sell the stocks within the trading hours of the same trading day, this is referred to as day trading or intra-day trading. Swing trading and position trading refer to when a trader buys a stock and holds it for a few months and a few weeks respectively and sells it at an appropriate opportunity.

Stock trading works on a buy-and-sell approach.

Stock investing demystified

Stock investing involves buying a certain quantity of stocks at a certain price and then holding them for a long duration to generate profits or returns. Investing in stocks is similar to investing in other asset classes, such as mutual funds, gold, and silver, among others.

This remains a risk-free technique to generate returns from the stock market. Stock investing involves the buy-and-hold strategy. 

Value investing and growth investing are the two common techniques usually adopted by traders. 

While value investing involves investing in the shares of well-established companies that have a proven track record, growth investing involves putting money in the shares of small companies which hold huge growth potential.

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