Traders

Playing the markets is a game that started centuries ago with most notable tulip mania. People often enter the field of trading and investing before doing enough study to see how game is played. You should be aware that the majority loses money trading and investing. I have seen a lot of succescuful people from other fields go into trading and investing and lose fortunes.

I am often asked what is the difference between trading and investing? Which one is more safe? Which yields more profits?

Trading securities is opening and holding the positions from a short period of time like hours or days, to a longer period of time like weeks or months. The goal is to make profit and then switch to trading other securities. Investing usually applies doing fundamental analysis and not looking at price charts, determining what is intrinsic value of a security and buying it at a discount.

Investors usually make big mistake. They have no exit strategy. As price of stock or any other security keeps falling they buy more and more. This is what most investors do. And this is not investing, this is gambling. Holding positions without exit plan is just waiting for one loss to take your whole account out. When you are investing or trading you must have exit strategy. Buying while prices is falling is one way ticket to portfolio blowout.

Traders and investors should always have exit plan for stocks or any other securities they are holding. When you enter long or short any security, always have fixed amount of money you are willing to lose, and NEVER add in to your losing positions.

Best traders in history were the ones who knew when to cut their losses short.