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Stockoptions | wwwstockoptions |
Option Trading | STOCK OPTIONS.COM
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Stock
Trader vs. Stock Investor
The difference between stock traders
and stock investors is that stock investors tend generally to buy
great companies (blue chips). They tend to invest for the long-term
and count upon compounded business growth to provide their returns.
Stock traders, on the other hand, usually try to profit from
short-term price volatility. Sometimes they try to rely upon the
psychology of other investors.
Individuals or firms trading as their
principal capacity are called stock traders or simply traders. The
stock trader is usually a professional. Many people across the world
can call themselves stock traders/investors or part-time stock
traders/investors, despite having another profession in parallel with
their regular trading activities in the financial markets. |
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When a
stock trader/investor has
clients, and acts as a money manager or adviser with the intention of
adding value to his clients finances, he is also called a financial
adviser or manager. In this case, the financial manager could be an
independent professional or a large bank corporation employee. This
may include managers dealing with investment funds, hedge funds,
mutual funds, and pension funds, or other professionals in equity
investment and fund management.
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A very active stock trader who holds
positions for a very short time and makes several trades each day is a
day trader. Other broad or specific designations for different kinds
of stock traders include the terms: speculator, hedger, arbitrageur
and market maker.
Tip!
There is much more involved with trading options, but these are some
of the most basic concepts to help you get started.
Stock
traders/investors usually need a stock broker, such as a bank or a
brokerage firm, as intermediate. Since the spread of the Internet
banking, it is usual to use an Internet connection to manage their own
financial portfolios, including ordering the sell/buying orders, set
stop losses prices and define buying/selling prices. Using the
Internet, specialized software and a personal computer, stock
traders/investors make use of technical analysis and fundamental
analysis to help them in the decision process. They utilize also
several advising and information resources based on the Internet and
the media, such as financial/business news and data firms (Reuters,
Bloomberg, Financial Times, Yahoo! Finance, MSN Money, AFX News,
Newratings, Forbes, BusinessWeek, Hoover's). They exclusively trade on
their own behalf, as a principal, investing money on a share or other
financial instrument, which they believe will increase in price aiming
to sell it later with earnings. According to the trading techniques
and strategy adopted, or the investing profile of each individual, its
trading style can be called value investing, growth investing, day
trading, swing trading, or trend following.
Although many companies offer courses
in stock picking, and numerous experts report success through
Technical Analysis and Fundamental Analysis, many economists and
academics state that because of Efficient market theory it is unlikely
that any amount of analysis can help an investor make any gains above
the stock market itself. In a normal distribution of investors, many
academics believe that the richest are simply outliers in such a
distribution (e.g. in a game of chance, they have flipped heads twenty
years in a row).
For this
reason most academics and economists recommend that investors invest
in funds that follow an index in the market, i.e. long-term and
well-diversified investments. However Value investors such as Warren
Buffet prove this theory wrong, consistently beating the stock
market.
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Sources: Wikipedia, FCIC, SEC and other public sources.
Stockoptions | wwwstockoptions |
Option Trading | STOCK OPTIONS.COM
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