In the financial markets, market participants can be divided into two categories; investors and traders. Although investing and trading are often used interchangeably by inexperienced investors, the mindsets of these two market participants are very different.
Investors are focused on the long-term, often paying little attention to the technical details of a particular asset. Instead, investors focus on the fundamental prospects of the underlying asset. If investing in a stock, an investor would familiarise themselves with the business model of the company, its management team, and its financials. Investors focus on long-term rewards by allocating capital for years or even decades.
Unlike investors, traders have a short-term mindset. A trader’s goal is to profit from the short-term fluctuations of assets trading in the financial markets. As such, traders closely examine technical data as well as overall market sentiment. Traders pay little attention to the fundamentals of an asset and will likely enter and exit positions regularly as they attempt to profit from price movements.
Do you consider yourself a trader or an investor?