Gain the skills to excel in the stock market. Whether beginner or experienced, trade with confidence and achieve your financial goals with the Trade and Travel course. Trading stocks for income is a concept more people are becoming familiar with. Actively trading is becoming a popular way to generate income and achieve financial independence.
When it comes to the world of finance and wealth-building, two terms often come up: trading and investing in stocks. While they may seem similar, there are distinct differences between the two approaches.
Disclaimer: The info provided in this blog post is for educational purposes only and should not be considered financial advice. Consult with a professional financial advisor before making investment decisions.
Trading vs. Investing
Table of Contents
Trading and investing are strategies used to generate wealth in the financial markets. However, they differ regarding time horizons, goals, and risk tolerance.
1. Time Horizon
Trading involves short-term buying and selling of stocks, currencies, or commodities. Traders aim to profit from short-term price fluctuations, often holding positions for minutes, hours, or days.
There are three types of investors in the stock market.
Depending on your goals, trading frequency, and how much time you’re willing to invest in research, there are day traders, swing traders, and long-term investors.
Day trading involves actively trading for income by getting in and out of a trade within the same day. In contrast, swing trading involves holding onto stocks for a more extended period, typically a week or more.
Not to mention, day traders, if profitable, have access to the money they generate quickly. So, if you’re looking for a hands-on, flexible, do-from-anywhere gig, this might be your route.
Investing, on the other hand, focuses on long-term growth. Investors typically buy and hold assets for an extended period, often years or even decades. The goal is to accumulate wealth over time through appreciation and dividends.
To simplify, whether you’re a day trader, swing trader, or long-term investor, you’re buying something inexpensively and selling it for more to make a profit.
Traders aim to generate quick profits by taking advantage of short-term market movements. They use various strategies, like technical analysis, chart patterns, market trends, or news, to identify short-term trading opportunities.
On the contrary, investors have a long-term perspective and aim to build wealth over time. Their goals may include retirement planning, funding college or graduate school, or achieving financial independence.
They focus on fundamental analysis, evaluating the overall financial health and growth potential of companies or assets.
3. Risk Tolerance
Trading involves higher levels of risk due to the short-term nature of transactions. Traders must be prepared to handle market volatility and accept the possibility (and reality) of losses.
They say most traders will lose money over their trading career, so be mindful. Risk management strategies, such as stop-loss orders, are crucial for traders to limit potential losses.
Investing is less risky since you can ride out market fluctuations and benefit from the overall market growth for an extended time.
No matter which approach you choose, investing carries risks. Diversification and understanding common mistakes new investors make and how to overcome them are crucial to managing risk and achieving success.
4. Frequency of Transactions
Traders frequently buy and sell assets, often executing multiple trades within a day or week. They closely monitor market conditions and make quick decisions based on their trading analysis.
Investors have fewer transactions. They buy assets to hold onto them for the long term.
Investing in stocks and trading comes with different fee structures.
Currently, many online brokers, like TD Ameritrade, Fidelity, and Trade Station, offer zero fees for trading stocks and ETFs (exchange-traded funds). However, fees may still apply for more complex trading, like options and futures.
When you buy or sell stocks, you may need to pay a brokerage commission. Fees vary by broker; some may be a fixed amount while others a percentage of the transaction value. Costs can add up quickly, significantly impacting profitability.
Active traders often use real-time market data to make informed decisions. Depending on the trading platform and the level of data needed, you might purchase additional monthly subscriptions.
In summary, fee structures vary widely depending on the broker you choose, the types of trades you make, and the trading frequency. Carefully review a broker’s fee schedule and terms before opening an account.
To bring all of these concepts to life, here’s a scenario that illustrates the differences between trading and long-term investing:
Meet Jasmine and Kamar, two friends passionate about investing in the stock market. They both have $10,000 to invest, and they’re excited to see how their money can grow over time.
Jasmine: The Trader
Jasmine is a trader. She’s on top of the latest news and market trends. She spends hours analyzing stock charts every day, monitoring economic indicators, and reading financial news. She enjoys the excitement of buying and selling stocks frequently to capitalize on short-term price fluctuations.
Here’s how Jasmine approaches her investments:
- Research and analysis: Jasmine studies the stock market intensely and identifies short-term opportunities. She focuses on technical analysis, looking at stock charts and patterns, and follows the news for potential catalysts.
- Frequent trading: Jasmine makes several daily trades, aiming to profit from short-term price movements. She might buy a stock today and sell it in a few minutes or days, looking for quick gains.
- Emotional rollercoaster: Jasmine often experiences the thrill and stress of rapid price changes.
Kamar: The Long-Term Investor
Kamar, on the other hand, is a long-term investor. He believes in a “buy and hold” strategy, which means he intends to invest his money and hold onto his stocks for an extended period, often years or even decades.
Here’s how Kamar approaches his investments:
- Research and analysis: He thoroughly researches companies and industries he believes will prosper over the long term. He pays attention to fundamentals, like a company’s financial health, competitive advantages, and growth potential.
- Infrequent trading: Kamar rarely sells stocks. He purchases shares of well-established companies with a long-term perspective and intends to keep them through market ups and downs.
- Risk tolerance: Kamar has a lower risk tolerance as he aims for stability and long-term growth. He’s not concerned about short-term price fluctuations because he believes in the value of his investments.
- Peace of mind: He experiences less stress and anxiety compared to Jasmine. He isn’t worried about daily market fluctuations and focuses on long-term portfolio growth.
This example demonstrates the differences between trading and long-term investing, emphasizing the importance of understanding your goals and time horizon when deciding how to invest your money in the stock market.
About Teri Ijeoma Trade and Travel Course
Regardless if you are a long-term investor or an active trader, understanding the market is essential to financial success.
If you are wondering how to get started but feel overwhelmed, follow Teri Ijeoma, a professional day trader and instructor with over 13 years of trading experience, empowering beginners and experienced traders alike to take the next step.
Teri Ijeoma founded Invest With Teri, a trading education company helping people learn how to trade stocks for income through Trade and Travel 2.0.
One of the key takeaways from Teri’s approach to actively trading is focusing on small, consistent gains that can accumulate over time. By aiming for 1% of their portfolio’s cash amount, generate steady income and grow your account.
If you are interested in trading but need help with where to start, Trade and Travel will take you by the hand and walk you through how to make consistent income so you can leave your job, pay off your house, remodel your kitchen, or do something else, big or small.
One of the things I appreciate about this course is the step-by-step instruction and guidance, from how to pick good companies to risk management.
If you are considering a course to learn how to trade, Trade and Travel by Teri Ijeoma equips students with the knowledge, skills, and confidence to start trading stocks successfully.
While YouTube University is free and can be a great learning resource, here’s what makes Teri’s course different from learning elsewhere.
Benefit 1: Convenience
This self-paced Teri Ijeoma course provides all the necessary information and resources in one place, making it easier and more convenient to learn about trading in the stock market.
Learning on YouTube takes a lot of time. However, following the course schedule, you can learn the basics within eight weeks.
If you need a refresher or want to watch the videos again, no problem. Enjoy lifetime access to the course and review its contents as many times as you’d like.
Benefit 2: Personal Experience
Unsure who to trust or which person is giving you the correct information online?
With an entirely laid out trading course, have everything in one place.
As I mentioned earlier, Teri Ijeoma has over 13 years of trading experience and has personally gone through the ups and downs of trading. She shares her losses and lessons learned, providing valuable insights and guidance to her students.
In Module 2 of the course, for example, Teri breaks down the (6) common mistakes new traders make and the solutions to each. She’s been through all the emotional parts of trading, so having someone who you can trust to guide you through makes a big difference.
Known for explaining complex concepts clearly, she has a background in education and a deep understanding of effective teaching methods, so her course is built with a solid curriculum.
I recommend watching several of Teri’s teaching style YouTube videos to see if you like her teaching methods. Teri has also been a featured guest on dozens on podcasts, so listen to a few to learn more about her and her trading methodology.
Start here by listening to Teri’s interview on The Thought Card Podcast.
Hear why Teri decided to quit her job to trade stocks full-time, and how she encourages people to become knowledgeable in trading.
Also, watch this video where Teri breaks down the differences between long-term investing and trading as a swing trader and day trader.
Benefit 3: Step-by-Step Guidance
This course walks you through the entire trading process, from opening a brokerage account to researching stocks, entering trades, risk management, and beyond.
While stock trading can offer financial freedom and flexibility, it requires discipline, risk management, and continuous learning. Therefore, those interested in entering the stock market should prioritize gaining knowledge and seeking guidance as they refine their trading strategy to increase their chances of success.
Trading stocks is not simply about buying and selling but also about understanding the intricacies of the market and making informed decisions.
Join 35,000 students who have taken the Trade and Travel course, including yours truly. A few years from now, when you’re making $100 or even $1,000 a day trading, you’ll think back to this moment and say, “I’m glad I signed up.”
Have more questions about the course? Read this blog post next, which features answers to the most frequently asked questions about the Trade and Travel course.
Danielle Desir Corbett paid off $63,000 of student loan debt in 4 years, bought a house at 27, and has traveled to 27 countries, including her favorites, Iceland, China, and Bermuda. Go here to learn Danielle’s incredible story, from struggling financially and in debt to finding creative ways to earn more and live on her terms. Listen to The Thought Card Podcast, where Danielle shares how you can creatively travel more and build wealth regardless of your current financial situation. Reach out to Danielle by contacting: thethoughtcard (at) gmail (dot) com.