Monday, October 5, 2009

Guideline #2 – Know the Difference Between Investing and Trading

Investors buy stocks for the long term. They usually intend to hold on to stocks for several years and maybe even decades before they sell them or pass them on to the next generation. As a result, investors do not usually worry about minor shifts in the price of a stock over the short term.


Traders are just the opposite. They take advantage of those short term shifts to make a profit. If a stock shifts within a matter of a day or even a few hours, the trader will spot that shift beginning to happen and buy and sell based on that shift and take their profits on the fly. By watching specific stocks, they can begin to sight small shifts just as they begin and place themselves in a position to take advantage of the shift.

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