Have you wondered what differentiates a trader from an investor? I have seen a lot of people who call themselves investors but when you seat with them and understand what they do with stocks, cryptocurrency, forex, and commodities you will understand that they are pure traders.
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Who is an Investor?
An investor buys commodities, bonds, cryptocurrency and or the projects and businesses for a long haul believing that over a very long period of time, there will be a very impressive appreciation in value. Traders buy stocks in the market so as to trade at a little changes in prices but an investor buys what the stocks represents which in most cases is the company or the project. I so many cases, investors buy a large percentage in bonds of a company where a little sell in holdings will cause a panic.
Investors are not bothered about the price of the market but the product, the team, the market presence, the internal cash flow. Investors do not care about the stock market, the coin market or any other trading market, although markets are very important but it is mostly the home for traders.
Investor buy part or all of a project or company not because of what the market says but because of what the project can offer in the nearest future. If an investor buys stocks, the stocks are going to be preferred shares at large percentage so as to have a say in the project or company.
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Who is a Trader?
Unlike an investor, a trader is a person who works with the stock market or any other trading market. A trader is really not interested in commodities such as gold, silver, or grains rather, they are interested in future contracts, stocks, and options. Unlike investors who care about the company progress as well as the managerial competence of the team, the trader do not bother about those, they only care about numbers and prices. They care about quick risks which includes buying and selling as well as call options and put options. Do not mistake hedging for trading. Unlike individuals that trade, companies hedge
What is hedging?
The buying or selling of future contracts to offset risks in businesses caused by a price change in price of raw material or a fluctuation in foreign currency exchange rate. Companies that utilizes commodity raw materials for businesses such as nickel, gold, silver, oil, copper, aluminum and others often hedge because of fluctuation. They do this to protect themselves from future increase in the price of raw material.
Having understood this, who are you? A trader or an investor, or maybe the both. You could tell me your favorite investment or trade.
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