Should a trade become an investment?

When I started trading, I wasn't always aware of the difference between trading and investing. Often, my trades became losing investments, because I decided to keep the positions way too long, not cutting my losses, not having a good risk management and I didn't care about putting stop losses orders.

Trading is not investing. There's a significant difference between these two concepts. The short explanation is that investing is putting money aside in a relatively safe place where it stays until you want to access it in a few months, years even decades. Investing is the process of putting your money to work for you. It might earn you a little dividends depending on which stocks you picked, or it can get you passive incomes, like rentals from real estate investment. When done properly, it can typically make more money than the interest you might earn from a saving account. But with reward comes risk. If you make poor investment choices, you could lose that money.

With investment you're gradually building your wealth, by maintaining a portfolio (stocks, bonds, properties...etc.), while in trading you're frequently buying and selling different types of instruments (stocks, commodities, currency pairs ), to outperform "buy-and-hold investing" strategy. Investment is much more passive, while trading is very active management of your capital.

If you’re a trader, you care technically NOT investing, you’re buying low, selling high in a relatively short amount of time. Within the realm of trading, there's a 3 main categories of traders.

Swing Trader: holding position; days to weeks. I consider myself a Swing trader.

Day Trader: holding position; throughout the day (no overnight positions)

Scalp Trader: holding position; seconds to minutes (no overnight positions)

Knowing the difference between "investing" and "trading" one would be more likely to understand his own risk tolerance and act accordingly. There's no good or bad way in your effort of making money, the only bad way is to loose your money not knowing what type of person you are by gambling your hard earned money.

VTL