With the rising popularity of the stock market among young adults today, many associated terminologies tend to confuse people. The most common ones are “Investing” and “Trading.”
Let’s look at the definition and the difference between these two terms.
Trading refers to the act of purchasing and selling shares of different companies at the right time and at the right price to earn profits.
Investing is similar to trading in many aspects. However, unlike trading, it has a long-term goal.
Trading and investing both involve earning profits in the stock market, but they pursue that goal in different ways.
Traders hop in and out of stocks within weeks, days, or even minutes for the sake of profit. This involves repetitive buying and selling. Investors have a longer-term outlook. They think in terms of years and often hold stocks through the ups and downs of the market.
Investors study statistics and growth potential of a company for a long-term gain, but traders take advantage of even the smallest of ups and downs in the market.
Trading that involves buying and selling within minutes is called, scalp trading which is often very very risky.
While swing trading involves investing throughout weeks.
Having mentioned that, before one starts investing in the stock market, it’s crucial to be thorough with the associated definitions before risking your money!