Holding Period :
A trader holds stocks for the short term sometimes a matter of hours or days, whereas, when it comes to investing, investors work on buy and hold a principle. The holding period for investors, maybe for some years.
Both traders & investors are exposed to certain risks in equity as well as in debt markets. Typically trading involves higher risk as the price might move high or low in the short term while investing comparatively have lower risk as it is an art of holding stocks for the long term. Daily market movements do not affect much on quality stock investments for a longer time.
Leverage is a mechanism one can use to increase their exposure to the market by allowing them to pay less than the full amount of the investment. Traders usually exposed to higher leverage compared to investors.
Traders are aggressive individuals who love the thrill of the market, so trading is a skill of timing the market whereas investing is an art of analyzing fundamentals of the company & creating wealth by holding stocks over the period.
Investment Philosophy :
Trading is a one-day cricket match while investing is test cricket.
Traders perform technical analysis to time the periodic swing of the market and buy & sell the position to generate profits in the short run. On the other hand, investors analyses stocks through implementing various valuation approaches and wait till stocks reach to there expected returns.
Trend Riding Vs Value Investing :
Traders ride the trend of the market to make money in a short duration and don’t necessarily mind losing to make profits. A missing trend may lead to the loss. However, investors keep themselves away from the trends and invest in value. They invest for a longer period of time keeping an eye on the stocks they hold. Investing works on the philosophy of “putting your money to work.”