Are You a Trader or an Investor?
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Are you trader or an investor? If you're new to investing you might not be 100% sure of which one you are. Also, you may be doing the opposite of what you want to do. You may be trading when your intention was to invest; or investing when your intention was to trade. We'll look into what makes someone a trader and what makes someone an investor. Hopefully after reading this you will be able to decide which one you are and which one you want to be.
Traders make their buy and sell decisions based off of technical analysis and chart patterns. To be a trader a person has to understand how to read charts and candlesticks. For a trader reading charts replaces reading a company's annual reports and quarterly reports.Traders typically hold positions for a short time period, it could be for a few minutes to a few months depending on the trader.
Source: Price Action Trading System
There are different type of traders as well as different financial instruments to trade. A trader can be a day trader or a swing trader. Day traders usually hold whatever they are trading for a short time period. Many don't leave any money in the market over night. Swing traders typically hold the instrument they are trading longer than day traders. Swing trades can last as long as a few months. Traders can trade stocks, ETFs, options, commodities, currencies (forex), and cryptocurrencies.
1. You make buy and sell decisions based off of technical analysis and chart patterns.
2. You don't look at the fundamentals of a company.
3. You hold investments for a short time frame (minutes, days, weeks, maybe a few months).
Investors make their buy and sell decisions based off of fundamental analysis of a company. Investors take macro events into consideration before making their investment. Good investors are looking for value when they invest. They are searching for an investment that the market has priced well below its value. Determining value differs from investor to investor. Some investors use a discount cash-flow model to determine a company's value, while others use a relative value approach. Some investors use a combination of both as well as other methods. Investors usually hold their investments for a longer period of time than traders.
1. You make buy and sell decisions based off of fundamental analysis.
2. You study the fundamentals of a company and/or a sector and industry before making a decision.
3. You tend to hold investments over a long time frame.
A good trader can do as well in the market as a good investor and vice versa. Whichever a person wants to be, the most important thing is to be good at what you do. To be a good trader understanding technical analysis, cutting losing trades quickly, and getting the most out of winning trades is the key to success. For investors, understanding how to conduct fundamental analysis, determining value, and patience are the keys to success.
Our quarterly reports and mini reports are based off of fundamental analysis. We are more investors than traders. We do trade from time to time, but would not consider ourselves traders by any means. If you want to see what a quarterly report looks like click here, or click here for the PDF version.