Are you an investor or a trader?
Before you plunge into the stock market and start investing in stocks, you need to be clear about what motive you have for your stock investments and what stock strategy you want to follow. Or put another way:
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Do you want to be an investor or trader? Or maybe something in between?
The biggest difference between
them is that an investor tries to follow the market, while a trader tries to
beat it. What do we mean by that? Let's start by explaining the difference
between these two concepts.
Investors
If you are an investor, you
think long-term and the company's opportunities are in focus for your
decisions.
A typical investor is looking
for:
· Companies
that are underpriced in the stock market. Such companies are interesting
because they will provide above-average returns as soon as the market becomes
aware of the underpricing to correct the underprice to the market price.
· Companies
that are a potential "star". That is, companies that have a large
growth potential, either because they are in a growth market or because the
company has a unique competitive advantage. Such companies are interesting
because they have the potential to provide an extreme super profit in the
future.
·
Companies
that are a "dairy cow". That is, profitable companies that generate a
steady long-term dividend or price increase in the share. If you are looking
for regular dividends and not exchange rate profits, it is important to check
the company's dividend policy before you invest in the company.
·
Companies
with lasting competitive advantages that can be utilized by merging the company
with another, entering into strategic collaborations or to further develop the
competitive advantage so that the company becomes a star or dairy cow.
An investor differs from a trader
in that they are interested in the company and its future. They have a
long-term perspective in contrast to the trader who only thinks short-term and
who is only concerned with the price movements at all times.
An investor studies how the
company develops over time by looking at various key figures that say something
about how earnings, margins and costs develop over time. In other words, they
carry out a fundamental analysis of the
company, and are concerned with how well the management of the company manages
to lead the company in the right direction.
Traderen
The trader is not concerned with
the company's underlying values and
long-term potential. They study and emphasize the price movements in the stock
market at all times and trade based on these. Their time horizon is always
short-term. Or you can use metatrader 4
download here.
The trader has a clear definition
of when to buy and sell a stock based on the price development. For this they
use various indicators in technical analyzes ,
e.g. moving averages, MACD, RSI, support and resistance levels, to
decide which stocks to buy and sell.
The trader is also interested in
studying market psychology and trades and holds stocks that have an upward
trend, while they sell and stay away from stocks that have a downward trend.
Many also trade only on the news value to exploit a momentum in the market to
their advantage, without using any kind of technical analysis, trend
development or similar tools to analyze the stock's assumptions.