Trading and Investing : Many people consider Trading and investing to be the same but it is not so, through this post we will discuss what is the difference between Trading and Investing?
In trading, shares are held for a few seconds to a few months. Trading is divided into many different categories such as
• Intraday Trading
• Swing Trading
• Positional Trading
Scalping – In this the share is held for a few seconds to a few minutes.
Intraday Trading- Intraday Trading As the name suggests, you sell the stock on the same day you buy the stock. At present, intraday trading is the most popular method of trading and most people trade in it.
Swing Trading- In swing trading the stock is held for a few days to a few weeks.
Positional Trading- In positional trading, the stock is held for a few months.
Apart from all these methods, there is another way BTST (Buy today and sell tomorrow) i.e, buy today and sell tomorrow.
In this, such a stock is chosen in which buying comes with more volume at the time of market closure, in this people buy the stock some time before the market closes and sell it after the market opens in the morning.
People who do trading, buy and sell shares are called traders.
Traders try to make money from the price movement of the stock. Traders use technical analysis for their analysis, in which the price and volume of the stock is analyzed with the help of charts. And then an attempt is made to understand the demand and supply zone of the stock and the trader’s psychology.
Investing – In investing, your money is invested for a long time i.e. for more than 1 year, those people who invest are called investors or investors.
Investors buy shares and keep them with them for a long time, they see their investment as their partnership in that company and stay in that stock for years.
Investors should think like a businessman, a businessman understands a business very closely, good investors also see a company very closely, before investing in a company, Fundamental analysis of the company is done. |
Two different principles are used in Investing–
• Value Investing
• Growth Investing
Just as in trading, the focus of the trader is on the price and volume of the stock, in the same way the focus of the investor is on the fundamentals of the stock.
The price of any stock depends on the growth of the company in the long run.
If the company does good business year after year and makes good profits continuously, then the value of the company’s share also increases.
On the other hand, if the company starts going into losses instead of profits, then investors consider it wise to withdraw their money from that company and then the stock of that company starts coming down rapidly.
But it does not happen every time, sometimes due to some reasons there is a slight decline in the stock of a company but if it is a good quality stock and the fundamentals of the company are strong then the company recovers the price of that share, so small An investor should not panic due to the volatility of the duration. If the fundamentals of the company are strong then the investor should stay.
In trading, the share is held for a short period, so if you hold the share for a period of less than 1 year, then you have to pay short term capital gains tax which is 15%.
But it is not applicable on intraday trading means if you do intraday trading then you have to pay tax on your profits according to your tax slab for example if you fall in 20 percent tax slab then you have to pay 20 percent tax on your profits .
At the same time, investors hold their shares for many years, so if you hold any stock for a period of more than 1 year, then you get exemption from capital gains tax, then this is also an advantage of being an investor.
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Nirmal is a NISM Certified Derivative Trader & the Founder of InvestandEarn.net (Financial Blog). He entered the world of Equity research to explore his interests in financial markets having 5+ Years of Experience in Share Market Trading & Investing. Nirmal frequently writes about Share Market Trading & Investment and publishes his personal view on the market. Drop him a mail at email@example.com.