Hi guys, hi from Andrea Unger! Today, I’ll draw a comparison between trading and investing, focusing on the main features, pros and cons of these two different ways of investing money.
People often ask themselves and others which one is the best between trading and investing.
Somebody claims that trading is not worth the effort, because investing eventually lets you make more money than trading.
I can’t say whether this is true or not. I think it depends on many factors.
Drawing a Comparison between Trading and Investing
In this post, I’d like to draw a comparison between these two different worlds, adding my personal experience. I’m a trader, so I obviously work in the trading world, but I would not exclude investing.
The Psychological Advantages of Investing
I think stress levels are lower in investing. You are supposed to invest in dedicated structures, funds, bonds, stocks or whatever, and you are supposed to allocate your money into these entities and then wait. Instead, in trading you are obviously more committed and need to make decisions every day.
When you choose investing, your life might be easier, because you make an initial choice and then wait for the results. In trading, instead, you constantly wonder whether what you are doing is right or wrong.
Well, if you are in a good period, you don’t question anything, but when things go wrong, you obviously start doubting, which is a normal reaction.
In investing, you entrust your money to some expert who uses it to make profits.
In trading, instead, you rely on yourself only. So, if something goes wrong, you get worried about your choices, and this causes a lot of stress to you. In fact, you start questioning not only what you have done, but also yourself and your skills. So, this is a great source of stress.
From this perspective, investing could be considered better than trading.
The Psychological Advantages of Trading
On the other hand, as it engages you more directly, trading also makes you feel that you have more things under your control.
In fact, as a trader you are free to make all the changes that you want; you can add new strategies to your portfolio, you can change your systems depending on the market situation, and so on and so forth.
Scalping and Control
An extreme application of this concept is scalping. In scalping you are “pim pum pam”, in the sense that you enter and exit positions very rapidly, so you don’t care very much about the direction of the market.
Scalping makes you feel that you have your balance under complete control or, at least, that you are not affected by market fluctuations, because short medium-term moves in the markets don’t impact your position.
You are scalping, you are jumping in and out, so you don’t care about that open position, because there is no open position that lasts long enough to make you worry about it.
Although scalping may bring extreme benefits, I don’t scalp. The main reason is that I don’t think I could ever be a good scalper. Scalpers are too involved; they have to spend a lot of time in front of their computer screens and click their mouse buttons constantly.
Which One Is Better?
I am a trader, but I would also consider investing, so I’m not claiming that one of the two is better than the other.
I am trying to show you that whatever thing you choose, you have to make a careful choice. When you opt for investing, you have to choose the right structures to invest in, so you have some important decisions to make.
If you decide to do it on your own, believing you are better than dedicated institutes and experts, that’s fine, but don’t think you can do it in an easy way.
Also don’t think you can start tomorrow: you need to be prepared to do it properly, otherwise you would probably face a disaster.
So, you can take your money under control, provided you prepare yourself duly. This means you need to study carefully what you can do and, then, once you have found out what is the best thing for you, the one that you feel you can do, you study the best way to do it.
Trading Is Not a Shortcut
This is not a short path. Don’t believe in those who claim that they can transform you into a successful trader with two or three lessons. Learning trading is very hard. It’s a long way. It can be done, of course, but it needs the careful and dedicated study of ALL the topics and subjects that are involved.
So guys, you can become traders, as long as you study hard. You can achieve this goal if that is what you wish to do.
However, if you choose trading only because you think it’s a shortcut to success, you’d better abandon it, because it’s not the way to go.
Ciao from Andrea Unger, see you next time!