Investing Versus Trading

The terms "investor" and "trader" are often confused and used synonymously. Unfortunately, this semantic misconception is completely incorrect and can lead beginners off on the wrong foot. The broad notion that anyone can escape the "9-5 grind" by becoming an investor is one factor contributing to this. In order to flesh out the misunderstanding, we must define and clarify these roles.

A trader personally involves himself in capital markets, creating and implementing his own investment stratagem. In order to produce equity, he determines his investment instrument (i.e., whichever type of trading in which he will engage), ascertains, weighs, and manipulates resource variables, and then implements a series of trades in order to generate profit.

Conversely, an investor does not directly involve himself in the money-making process. On the other hand, he allocates his money into resources that could potentially produce a return on investment. Some examples of investors are buyers of mutual funds, real estate, etc. The term investor connotes a somewhat more imprecise and encompassing concept than the term trader. An investor really can be anyone putting their money into a portfolio.

Being a successful trader is much more complex and sophisticated. In order for traders to acquire consistent revenue, they must be very active; constantly researching, analyzing, valuing and devaluing, and buying and selling. Especially with all of the strategies available today, and the ephemeral nature of modern markets, trading requires skill and finesse. In order to be a successful trader, one truly must be on top of his game and have all of the information. Trading as a full time job is definitely a world away from the casual low-ball trading that many people engage in (especially through online brokers) in their spare time.

Investing at its core is a more long-term road to profits. Investors must be patient as they put their money into something and wait for a return. When returns start to pile up, investing doubtlessly can begin to snow ball, however it does not offer the quick returns that trading has the potential to produce.

The terms investing and trading, therefore, truly sit on diametric ends of the spectrum. Before quitting your day job and plunging into the world of trading or investing, be sure to have all of your information. Be prepared with a proven system and/or mentor. If you're thinking about Forex, for example, there are several training courses available online that you should utilize. As I said earlier, the worlds of casual vs. full time trading or investing are polar. Misconceptions can often coerce novices into these realms under false pretenses. Knowing exactly what your profit strategy is is a key preparatory caution against the pitfalls of capital markets.

Taft Coventry is an Associate Partner at the most trusted source for online money making information, http://www.MadisonandMonroe.org Visit http://www.MadisonandMonroe.org for more home business information, articles, and related product reviews.