Trading and Investing definition.
What is Trading?
Trading is the practice of Buying and Selling of stocks, futures, currencies, bonds, ETF, ETN’s, Commodities and Cryptocurrencies. Positions/portfolios are held in short period of time.
Practice of Trading:
Using technical chart analysis to enter and exit a trade.
Positions are held less than 1 year.
Types of Trading:
Intraday or Daytrade ~ stocks/asset classes that are bought and sold on the same business day.
SwingTrade ~ stocks/asset classes that are held for more than 1 business day.
Trading strategy is solely focused on technical chart analysis, catalyst driven trades and overall market condition. It does not consider fundamental valuation.
What is Investing?
Investing is acquiring stocks/asset classes that are held for more than 1 year
Investing strategy in stock market:
Solely using fundamental analysis/ valuation to enter or sell position.
Positions that are held more than 1 year.
Investing strategy is solely focused on the asset fundamental valuation, revenue growth, and dividend return. Technical chart analysis and market condition is not applicable to this strategy.
Trading versus Investing:
The concept of Trading and Investing is commonly misunderstood. The two are totally different from many perspectives, they differ from strategies, approaches, timeframe and IRS tax code.
Though they are different, they share a common goal, which is to make profit from the stock market.