Investment versus Trading

Trading is the purchase and sale of the security over a short period of time with an intention of profiting. Generally, traders rely on Technical Analysis to make informed decisions and do not conduct comprehensive research. Investing, on the other hand, is likely to be supported by fundamental research, which is the analytical method of predicting long term prospects of a particular asset. Investing involves holding the asset over a longer time frame and benefitting from the long-term appreciation. What separates trading from investing is that generally in trading one has an exit expectation, making the trade to have a finite life. Investing, on the other hand, is more open-ended. An investor buys securities and holds on to their positions as long as they continue to like the prospects and does not think in terms of a price at which to exit the stock.

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