What's the difference between trading and investing?

[anestelen]

Hey guys. I'm pretty sure that when you trade, you're actually investing, and one thing involves trading systems or whatever, and the other one deals with Wall Street. But I need to know the difference.

Also, if I want to make money online, and NOT deal with customers, advertising, or doing any marketing at all, can this be a good option for me? I do know that I need a good capital, but I can handle that.

Another question is, how much capital would I need for this kind of business?

 

[Jaydee]

Hey guys. I'm pretty sure that when you trade, you're actually investing, and one thing involves trading systems or whatever, and the other one deals with Wall Street. But I need to know the difference.

Traditional investing is based on taking ownership of a company with the expectation of obtaining a share of its profits in the form of a dividend. Typically, this is how privately owned companies work - their share price remains static and the owners make money from the profits generated. It's the same for publicly listed firms too but their share price does fluctuate in accordance with the supply and demand phenomenon.

Typically, trading is making money from a change in price. You are, essentially, making money (and losing money) from other people that take the opposite side of your trades.

Also, if I want to make money online, and NOT deal with customers, advertising, or doing any marketing at all, can this be a good option for me? I do know that I need a good capital, but I can handle that.

It's a good option if you can perform well but you have to understand that trading and investing are skills which are learned over time (often long periods). You are likely to find it very difficult to make money in the stock market.

Another question is, how much capital would I need for this kind of business?

You can start trading with very little which is highly recommended but, if you want to live off your returns, based on a 10 - 20% every year, you'll probably want in excess of $200,000.

My advice to you is trade with a very small account to find your feet. The last thing you should do is start risking hundreds of thousands when you have no idea what you are doing.

 

[Rossini]

Trading is usually an active way to generate income, investing is usually passive.

 

[FSBS]

I's say trading is finding ways to exploit the financial markets for gains in the shorter term.
Investing is more like a longer term saving. Using your money to gain returns over time (e.g. dividends, bonus issues, yields etc) whilst expecting your initial interest/stake to rise in value and bring you a gain.

 

[montmorencyt2w]

But of course, there are longer-term traders as well; kind of hybrid, except that they'd still be much more active than the average investor.

People who take "let your winners run" a bit more seriously than most.

 

[FSBS]

Then they are traders who have invested

 

[Hilarymannah]

A trade is a tactic used in an investment strategy!

 

[zambuck]

Trading is usually an active way to generate income, investing is usually passive.

But you still make money/generate income by Investing...What are Dividends....?

Trading is short term and almost full time 'job......Investing is long term speculation and not full time job.....

Is Warren Buffett trader or Investor..?...I would say Investor by Fundamentals concept....!

 

[AlexisD]

I'd tend to put it this way:

When you invest, you invest in companies.

When you trade, you place multiple bets on financial securities. You barely focus on the underlying companies.

Just my 0,02, there would be tons of things to say...

 

[Rossini]

But you still make money/generate income by Investing...What are Dividends....?

Trading is short term and almost full time 'job......Investing is long term speculation and not full time job.....

Is Warren Buffett trader or Investor..?...I would say Investor by Fundamentals concept....!

Regardless of money generated by investing it is still usually a passive form of income.

Both are speculative, and trading doesn't have to be a full time job. EoD traders are still traders but only need to monitor their position once per day. I would argue Buffett is both, but I think most would say he is an investor.

 

[barryb]

Traders go both long and short of markets, investors only go long. Simple.