Probably one of the most basic yet misunderstood truths about the Indian share market is the difference between stock investors and stock market traders. Both strategies are completely different based on different tactics, personalities and analytics. Nonetheless, many would be investors’ use the terms interchangeably and as such are perhaps confused then why taking advice from one then the other always proves unsuccessful. Stock trader is basically a short term trader who isn’t concerned with long term movements with organizations or even of company’s health. Stock trader is mainly concerned with making profit over a period of seconds to couple of weeks. His strategy is to replace the market maker as seller to retail investor.
The stock trader’s main competition is market maker, which is an investor or institutional investor, who purchase securities packages directly from organizations and sells them to retail investors. The market makers’ liquidity is what keeps the market liquid at any given time and market makers are entities, which stabilize the moment to moment stock price. Market makers are highly experienced traders with the latest in automated computerized technology. The successful stock trader attempts to cut the market maker off from some of his stocks and sell them at a profit to retail investor first. This can be done in seconds or weeks by the method called swing trading. Successful stock market traders are able to decipher reports and read charts instantly and basically have access to the latest of each.
On the other hand, stock market investor doesn’t concern himself with stock traders’ dealings and is interested in finding good firms to invest in over a period of months to years. He doesn’t worry about market makers’ and stock traders’ short term movements attempting to profit in short term. To be a successful stock market investor needs proper analytics and more research than speed and technology. Be prepared to vet with firms you like by reading their 10-Q and 10-K reports, keeping up with investor relations associates of the company and listening to investor calls. A successful share market investor usually selects an industry in which he/she has some experience so as to be able to better decipher the data he gets.
To be a stock market trader needs latest technology and speed. To be a successful long or short term investor usually needs picking one strategy over the other and sticking to it. To be a stock investor needs dedication and research to analyzing data. The middle ground is no man’s land, and the sooner you pick one side or the other based on your resources and personality, the better off you will be.
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