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Trader or Investor?

You can�t watch financial television or pick up an investment publication without seeing the terms �trader� or �investor� a couple of hundred times.� But what are the differences between these two types of participants in the financial markets?� What behavior is appropriate for each?� Can you mix the characteristics of the two pursuits or is this likely to get you in trouble?� What should be the focus of each?� It IS important to figure out if you are primarily an investor or a trader.� You can be one or the other at different times, but you have to decide which hat you�ll primarily be wearing when embracing a specific transaction.� What is the key difference between an investor and a trader?� An investor has to first be concerned about the fundamental data about a stock, since he is in a position for a longer period of time.� Technical analysis is secondary to an investor.� The trader needs to focus on recent price action of the individual stock and the market as a whole.� The investor and trader get into a transaction for different reasons and needs to keep in focus why they are holding the position they are in.� A trader may buy or short a stock because of a particular bottoming or topping action on a price chart.� An investor looks at a new product introduction or a consistent pattern of earnings.� An investor better know what is happening in an industry, where in the simplest terms a trader may not even care what products a company manufactures as long as the share price exhibits certain characteristics.� The investor better read as many financial publications as possible, and he�d better know how to read an income statement and balance sheet.� On the other hand an investor needs good charting software, a fast link to the markets, and a bookcase full of books on technical analysis.�� There is a spectrum in which the two profiles can be mixed.�� In the middle of the time spectrum you need to develop both skills.� You can have great gains by purchasing a rapidly growing company with great earnings when the share price is temporarily undervalued.� On the short end of the time spectrum the trader may not be concerned about fundamentals since he is only holding the shares for a handful of minutes or hours.� All he cares about is that the shares seem to be at the low end of a range or has been steadily moving higher with a discernable amount of momentum.� On the long end of the spectrum the investor doesn�t care if a stock is at the exact bottom of a move since he won�t be selling it until the stock significantly exceeds the top of it�s current range due to excellent earnings and product growth orchestrated by a superb management team.