OPINION
EVALUATING THE DIFFERENCES IN TRADING AND INVESTING TO MAXIMISE PROFITABILITY Trading is regarded as a higher risk activity as a result of the greater market volatility and the need to act quickly in response to shifting market conditions.
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n financial markets, trading and investing are terms that are frequently used interchangeably by the general public. In reality, these are two distinct activities, each with its own goals and characteristics. Understanding the differences between these two approaches is crucial for achieving profitability and financial success, whether you are a seasoned trader or a novice investor.
INVESTORS CONCENTRATE Trading is most often used to describe the shortterm buying and selling of assets, like stocks, bonds, currencies, or commodities. Traders seek to profit from market fluctuations, based on their research on technical analysis and other market indicators; while the objective is short term capital gains. Investing, on the other hand, typically entails purchasing and holding assets for a more prolonged period, typically several years, with the aim of generating long-term returns. Investors
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often concentrate on fundamental analysis, as well as the general health and growth potential of the businesses or industries in which they make investments. While buying and selling assets is a part of both investing and trading, the two activities differ primarily in their time periods and approach to investment decisions. The degree of risk involved in trading versus investing is also another significant distinction. Due to greater market volatility and the need to act quickly in response to shifting market conditions, trading is typically regarded as a higher risk activity, while investing involves a longer time horizon and a more patient approach, potentially making it a lower risk activity. Additionally, trading provides a variety of financial instruments, such as futures and options, in addition to conventional assets like CFDs, forex, and commodities. Due to their high leverage, forex and CFD trading have further
JULY-AUGUST 2023
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