Trading versus Investing

The investment concept is as old as trade own business. In the purest form of investment, the investor provides the capital (money) needed by a business matter, and instead, the business of company provides the investor an ownership stake in the business, or “actions”. Under that agreement, both parties hope that the business will grow in value. Therefore, the investor participation grows in value as well.

A form of business investment occurs when a company offers a portion of their shares to the public (IPO “,” Initial Public Offerings). Such offerings can raise millions of dollars – or even billions of dollars of capital to the firm. In return, investors who bought the shares of each own a share of the capital of the company.

Stock trading is different from the investment if you consider that trade is based more on shifts in the value of the stock itself. The investment, moreover, is based more on the growth of the company that issued the public that, in theory, increase shareholder value over time.

For example, say Joe investor buys 1,000 shares of a company’s initial public offering of $ 10 per share. Joe is thinking that this is an excellent investment as the company is expected to grow by a factor of 20 in several years. If this pans out, your initial investment of $ 10,000 could be worth at least $ 200,000.

Now, say that the word comes out of this company, its future looks very promising, and suddenly everyone wants “in” Due to high public demand, the price is driven up to $ 20 per share, then $ 30, then $ 40, etc. Other investors announcement of the new “hot” issue of securities, and a mad shopping frenzy is driven by its price to $ 100 in a matter of days.

What happened? The company has not changed, has not made a dime, and has not had the opportunity to grow. However, the investment of $ 10,000 initial Joe is now worth $ 100,000! If Joe wanted, I could immediately sell their shares for a 10-to-1 gain rather than waiting several years to reach its goal of a 20-to-1 profit.

Perhaps Joe will sell. In this case, made a trading stock — cash. Your benefit, while large, not the result of underlying business success, but their gain is the result of speculation by investors. Furthermore, those who bought shares of Joe could turn around and sell them to someone else, again, as another trade. This is the fundamental difference betweeninvestment and trade.

However, the terms of investment and trade has come to mean the amount of time one intends to keep in stock. Today, investment and trade terms are used almost interchangeably — with the distinction of time. One is “investing” if the shareholder intends to maintain for a long period of time, one is the “trade” if the stock is held for a short period of time.

This distinction is important to understand more from a philosophical standpoint than technical. For some reason, the activity of “trade” is considered politically incorrect in certain parts the media. Some advocates of anti-trade to go so far as to understand the addiction to gambling and questionable morals other partners to “exchange”.

However, in today’s market, every stock is in fact a trade. Unless one is participating in an initial public offering, or a penny a share purchase is inthe business, so that one is not really investing at all. Are all offices, although some with longer time horizons than others.

Despite its apparent social taboo, trade differs from “investing” only on technique. Both the merchant and share the same goal — investors capitalize on a growing population. Although compelling arguments can be made with both techniques, the point is that “moral” impact on trade should not be a factor and need not be part of the debate, at least not without stating that “investing” has the same implications but with the horizon of time is meant to be the only technical difference.

Long-term investors are quick to point out that some people have lost fortunes in day trading and other forms of stock market “game”, hence their bad reputation. Moreover, “investors” is certainly not immune to losing large sums of money, which can now be painfully obvious to thousands of speculators who held the collapse of technology throughout 2000.

“Investors are the real players,” said 19th Century legendary trader Jesse Livermore. “They make a bet and stick with it, and if she does not lose everything his way.”

Indeed, the successful negotiation requires a skill, like any other profession, as the special skill that requires precision and concentration, otherwise misfortune. In the hands of a skilled surgeon, a heart transplant goes smoothly. Such surgery, attempted, without education, it would be certain death. Stock trading is no exception.

GarsWorld it comes to trade, although the technical difference between the trade front investment is really about time. Given this distinction, I must emphasize the following approach to my strategy.

I have no fixed rule about the weather. I may have an action for five minutes or five months, all that matters is to maximize profits and minimize losses.

I’m surprised that the concept of ignoring the time factor is something “new” for many of those involved in the stock market. Most investors and day traders alike have a very specific idea about the weather. The investor is often in the long run, against all odds, against all odds, while the day trader that specializes in mixed shaving fractions of a second of the 5-minute trades. I find it interesting that none of these approaches in mind to maximize profits. Instead, emphasize the importance of time as high-level strategies.

Consider the following as an alternative strategy: to own a warehouse, where is increasing and not otherwise own. In volatile markets, this will look like a trading day. In bull markets will be stable andinvestment.

The guiding principle should be to maximize the benefit of one!