Here at MTI, a lot of our students ask, what is the difference between trading and investing? While these titles seem very similar, they are actually quite different.
Investors are in it for the long haul
As an investor, your main concern is making money in the distant future. Investors take a chunk of money and put it in a financial market, expecting to see a substantial pay off down the road. They utilize what we like to call the “buy and hold strategy.”
Now you may have heard that the “buy and hold strategy” is the only one that works (and there’s no doubt it is a very good strategy), but it doesn’t come without downfalls. In order for buying and holding to work, the market MUST go up; does the market always go up…no!
As you are well aware, the market is constantly going up and down, much like a roller coaster. As an investor, you are firmly strapped into this ride; eyes shut tight, hoping the unexpected pitfalls will end soon. Your stomach swirls inside, just like a young child who’s a bit apprehensive on their first go around. The market makes you nauseous as you ride through the ups and downs.
Take a look at the image above. What if you retired in the year 2000? Everything would of tanked! After you made profit back, you would loose it again. The great thing about being a trader is you can make these highs and lows work for you.
Traders are here to enjoy the ride
Now picture a trader as a daring roller coaster fanatic! They love the constant twists and turns of the metaphorical market coaster. That’s because a successful trader learns how to take advantage of the ups and downs in the market. Instead of making money when the market moves up, only to loose it when it goes down, traders can make money throughout the entire journey. That’s because unlike investors, who can only profit from upward moves, traders have the ability to profit in both upward and downward movements.