Sunday, 5 October 2014

Trading and Investing


Trading and Investing

Nobody knows who is an investor and who is a trader. Surprisingly when talks about trading, the person sounds irresponsible and labeled as a gambler although he may be a great risk manager.  While if talk about investing, the person sounds much matured conservative and risk averse.



Investors are those who purchase the stock of a company to become the part owner of the business. They control the management of the company and most of the time acquires a big chunk so that they are assured a seat in the board. Well known investors like Warren Buffet and our own desi versions are doing the same.

                     The intention of a trader on the other hand is always to profit from the rise or fall in price of a security. If you are in the market to profit from the price move of the security, you are a trader. Time frame of the trade and the tools used to make the analysis of price can be different. Some traders use fundamental analysis others technical indicators and a few trade pure price action. Some stay in the trade for a few seconds only and some others stay for months.


             Most of the so called investors we come across are just longer term traders who use

fundamental analysis for their trading decisions. They will claim they are disciples of Buffet and they are in the market for wealth creation. Every trading method needs an edge and here the edge is access to inside information. If you think you have such an edge, go ahead.

         Many of the so called successful investors made it big either on inside information or
by manipulating the market with raw money power siphoned out from banks and other institutions. They happened to be at the right place at the right time and had the guts to act on it. Where are those guys who made lorry loads of money and appeared as the cover picture of our business magazines during early 90s? What happened to their investment acumen?

Most of them were brokers doing institutional business and was front running the domestic
institutions like UTI and LIC. The entry of FIIs and electronic trading just destroyed their
edge.

          Don’t think long term if you have only limited resources. It is very difficult to create
wealth through the equity route. Times have changed Companies can rise and fall within months. Companies once considered as bluest of the blue chips are struggling to survive. We can always cherry pick some examples for argument sake but practically it is very difficult to create Alpha. One among the portfolio can be a ten bagger, but what if few others are not performing? It will be very difficult to outperform the index acting on published information.

       So in my humble opinion, it is better to trade the market for income and not for wealth
creation. You may differ.



About

Parag Patil is a technical analyst and trading system designer with stock excel programmer. I hope the articles and live chart of nse future and mcx on this Website will be as helpful and profitable to you . I try to update and post new articles tips everyday. My motto is to encourage the traders, so that they should able to understand the technique views behind the moment of stocks. I have deeply analyzed with many technical indicator with parameter and added to my amibroker afl. And even taken backtest report which is never being implemented. Any of the analyst expect me. Seeing all this you may understand that my views is more technical than commercial. If you are profited by my views I fill happy.

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