The two types of participants in equity markets; Investors – who work on the principle of buy and forget for a long time in the belief that their investment will yield capital returns and dividends over time, and second are traders – who engage in the buying and selling of financial assets for a short period of time for profit. Investing in vision capacity to see a diamond in a coal mine. An investor should have a firm grasp on the fundamentals and target for the security. When markets are volatile, an inventor will sell his portfolio and seek refuge in safe heaven assets, whereas a trader will see volatility as an opportunity to profit from price movements.
Investor and traders can be differentiated on following points
Risk is the fundaments character of stock markets. It does not matter if you park your money for a day, a year or 10. Risk of losing or exponentially increasing your capital is always present. Traders, who trade large volumes on daily basis, take risk for reap profit or incur losses.
Trader actions are based on short term news, which they execute by buys at low prices and sells at high prices to make profits on daily basis. Trader usually trade in securities from which entry and exit is easy and fast, which have healthy liquidity, whereas, investing is an approach that works on buy and hold principle. Investors invest their money for years, decades or for even longer period. Investors are unaffected by short-term price corrections, but they view them as an opportunity to add value securities to their portfolio.
Traders use technical analysis and market news to take advantage of news and short-term price differences. The investors invest based on fundamentals; they invest in companies that they believe have the potential to become multi baggers in the long run. To succeed in the long run, an investor must have patience
The volumes traded by a trader are much more than an investor. A trader move in and out of a position when the news is priced in for profit booking where as investor wait till the time he / she feel the company / economic fundaments are deteriorating
Short-term profit margins differ between traders and investors, but in general, investors seek higher returns over longer time periods by buying and holding. Traders, on the other hand, use rising and falling markets as an opportunity to enter or book profit in a shorter time frame, resulting in smaller, more frequent profits.