We Are Traders Too

A stock trader is someone who buys and sells stocks, bonds and options in the financial markets, hoping to profit by making a series of better trades. A trader is inherently different than an investor in terms of a financial approach. An investor will buy an asset and hold it, patiently waiting for the stock or bond to appreciate in value over time. This is known as a buy-and-hold philosophy. A trader will buy an asset and hold it long enough to take a profit, and then sell it and start the process again. This is known as the buy-and-sell philosophy.

Traders see more profitability in the notion of buying a stock when the price is depressed and selling when the price goes up. A trader may then wait for the stock to retrace, then buy the same stock again and repeat the process. (Experienced traders even learn how to make money by buying low and selling high, then shorting the stock as the price retreats.)

On the other hand, an investor will buy a stock when it is considered to be at a depressed price. They'll look at the stock's fundamentals, including factors like debt, available cash and a series of ratios, like price to earnings. The investor buys for the long haul, hoping the stock will appreciate in value and rise in price, and that it will be worth more in 20 years.

Which is better, trades which are conducted over and over or trades that are conducted once and meant to endure? It all depends on an individual's philosophy and their tolerance of pain. A person who has plenty of time to watch the market and has an interest in stock investing may enjoy or prefer being a trader. Someone who has neither the time nor inclination may be better off going with the buy-and-hold route.

There are many ways to make better trades. It all comes back to personal preference. A trader often yearns for the thrill of the daily process, while an investor usually prefers the serenity that comes with a long-range strategy.

Both sides look at each other with curiosity. The investors typically see a trader as someone who is reckless, following a voodoo approach to the stock market. Traders can't believe how boring the investors like things and view them to have the excitement of a potted plant.

Whether an individual wants to be involved on a buy-and-hold or buy-and-sell basis, it is still possible to make better trades. The key is consistent education and consistent gains. Both methods are viable. It's up to the individual to make a decision for themselves.