Why Stock Trading is Better Than Investing?

No one ever thinks of becoming a brilliant investor when starting out. Not even Warren Buffett started investing in the stock market with the goal to become the greatest investor in the world of all time. Neither did Rakesh Jhunjhunwala or George Soros start to believe they would have become the finest traders.

When an investor starts their journey by investing a small amount in the market, they are clear whether they want to become a trader or just hold on to investing like a long-term investor. The answer is that they gradually evolve with time and grow their wealth with experience. This is the benefit of learning the stock market.

Typically, a stock trader starts with investing in the share market as a long-term investor or a short-term trader. The answer is that they evolve with time. No matter which type of investment you choose in the end, there is a lot of share market training required to become successful.

Still, confused? In this post, we will discuss the things to understand which is a better investor or trader. But before we get onto the topic, let's understand the difference between both.

Who are a trader and an investor?

A trader is a person who engages in buying and selling of financial assets such as shares, debentures, bonds, options, future, community. While an investor is an individual who commits capital with the expectation of receiving financial returns.

The share market can be an intimidating place for a beginner. Besides, entering into shares without any formal knowledge can be mysterious, complicated, and murky. By following the advice in this post, absorbing the core trading strategies, you can have excellent potential for an outcome as a successful market entrepreneur.

Limitation and barriers to trading

As long as you have money and you are willing to take risks in the market, there is no such thing that can stop you from becoming a trader. You just need to be legally eligible to invest in the market. Before becoming a full-fledged trader, you need a verified demat account. Once you meet the basic conditions then you are good to trade in Indian Stock Exchange. Today it is possible to make a quick demat account and start to trade.

The most important thing to remember is that you are required to invest in proportion. For instance, if you trade with a capital amount of Rs. 1,00,000 and you gain 3% of your investment, then you are looking at the corpus to grow into Rs. 35,00,000 in 10 years.

They never try to beat the market

If you believe that you can be a successful intraday trader by taking a contrarian position in the market, then think again. You may occasionally succeed, but a truly seasoned intraday trader will always ride on the side of momentum. Successful intraday traders never try to predict or outperform the market. Their focus is purely to understand the underlying trend in the market and play the stakes accordingly. Humility is the key.

Operate with discipline and as per a trading plan

There are no successful intraday traders without discipline. Set your trading plan, keep a backup plan of action and execute your trades. Discipline is not a skill or a quality. For successful intraday traders it is a habit and a way of life! When you are running leveraged positions in intraday trading, managing risk becomes a lot more important. Successful intraday traders believe, and rightly so, that risk is what you can control, not returns. Hence, that should be your focus. They set strict limits for capital depletion during the day, during the month and overall. Successful intraday traders also have the habit of ensuring that every trade is backed by a strict stop loss. They never get into a trading position without defining the maximum loss on the trade. They also make it a point to stay out when the markets become difficult to understand.

Modifying trading capacity

One of the biggest advantages that trading allows against investing is how much risk can you take? This directly depends on the allocation of your capital resources available. For instance, if you have Rs. 1,00,000 then you can take a day trading position up to Rs. 6,00,000 which is a higher risk potential. Your capacity to share trading depends on the funds you have available in hand.

Different Career Prospects

Share market courses not only offer great learning but also help you accelerate your career in the stock market. The training facilitates transition into a new industry. If you utilize your share market training in the right way from the first day, you have gained higher chances to become successful.

The learning requires time and effort when you consider to earn lifelong skill. Thus, you’ll be able to make an unlimited amount of money in any part of the world. This is a key area to strengthen your entrepreneurial skills.

Means of acquiring knowledge

Trading requires serious dedication to learn concepts, technical tools and techniques. If you carefully learn how to trade it may be a strong basis to earn a profit. Trading is an art of operating into the capital market. It requires good knowledge of the market, interpreting news, and maintaining a balance sheet. Trading also teaches you risk management and money management skills which is important in the stock market mechanics.

Risk Management

Profit targets should be a function of the risk entailed in your stop losses. For example, you cannot have a stop loss of Rs5 and a profit target of Rs4. That is a negative risk-return trade-off. Smart traders always ensure that the profit target in any trade is a multiple of the risk and calibrate their stop losses and return targets accordingly. In fact, successful intraday traders use a favourable risk-return trade-off as a key criterion for trades. As a trader, you are putting your capital in risk every day. Firstly a trader compels to set a limitation on the capital that they are willing to trade. Secondly, you need to have an exit strategy which is in value for any investor.

Learn techniques on higher ROI

Investment offers a discrete income on return on investment. An investor creates wealth in the long run. Trading combines two important aspects in the share market that is churning velocity and return on trading. For example, you earn 5% in a trade on the amount you invest in a month or year 3% by churning thrice a month. The trade here entails a cost of understanding that it is useful for long-term investing.

Trading allows in all types of market

One of the biggest advantages of trading is that you can invest in all markets - forex, currency, commodity, capital etc. While investing is an approach where you need to invest for the long term. For instance, you can buy shares for a short term without delivery. You can take a hedge position in the market with the assistance of future or opticians. If the market gets volatile, you can use trading strategies to momentum, straddle, etc to play with stock price movements. Therefore, trading is flexible in comparison to investing.

Trading for an additional source of income

Trading has become a favourite sector for working professionals, housewives, and retired people who can make money in demat accounts. People from different walks to life are trading as a secondary source of income. This is because trading allows you to build wealth in a flexible manner. This, it enables you to create money without impacting your daily work life. You can trade 24 hours a day in the national and global market.

The Bottom Line

No matter if you choose to invest or trade. The purpose of both is to make money. Although, trading is a perfect stepping stone for people who want to take leverage of their savings by investing in the share market. But it requires lots of share trading, market knowledge, and patience to endure your skills and stand out as a steady investor.

Finding the right share trading course

IFMC Institute is the best and biggest institute for stock market trading in India. They offer over 16+ online stock market courses. IFMC is awarded as the best institute for financial education by Radio City Delhi City Icon Award. It is the only certified institute by ISO to meet international standards of education, training, counselling, and placement. The core thing that sets

IFMC Institute apart from other colleges is that IFMC offers simple courses which are easy to understand for the common man. Institute of Financial Market Courses (IFMC) is a premier institute for financial market education, currently operating in five major cities: Noida, Vaishali, Laxmi Nagar (Delhi), Lajpat Nagar (Delhi), and North Campus (Delhi). The stock market institute delivers cutting-edge training to people looking for a career in stock market. Our program brings an extensive focus on next-generation learning which enables students to stand out in the competitive employment profession.

IFMC offers short term job oriented courses in Advance Diploma in Financial Markets, Diploma in Financial & Stock Markets, Certificate Course in Stock Market. We also offer varied courses for investors and traders like Quick Trader Course, Stock Market Course for Traders, Stock Market Course for Professionals, Technical Analysis Course, Fundamental Analysis Course, and Options Strategies Course.