Difference between Trader and Investor

Many people use the term trader interchangeably with term investor without realising the difference and impact it may have. Till things go right, its fine, but when problems creep in, difference becomes obvious.

Market has two type of people, one who buy stocks with intention to sell it at later stage without much interest in company policies and related, other than it being right company with good or healthy market standing. While other group of people are those who thoroughly study company's profile, policies and if they find it potentially beneficial, they associate with the company. First group of people are called TRADERS, while the latter one are INVESTORS.

Traders usually hold on to stock till its throwing in profits and may be for short term only. if it starts showing losses, they sell the stock to get on to another.

Investors on other hand have thorough understanding of policies and working of company, so they don't sell stocks at slight loss, unless they re-assess and find situation to be worthy of selling the stake.

Problem may arise when a trader tries to become investor at time of loss or slight fall in values, or viceversa when loss is marginal.

Trader trying to become an investor may end up loosing much more, unless he has studies company in detail and knows when to move away. Investor if tries to become trader and sells stake at just loss of say 5%, he may well be ruining his future, unless his analysis was right.

So, there is a difference and its important to understand what you are becoming or are at present. Never try becomnig both with same stock.