Over the long term, they may benefit from large scale movements (provided that they can ride out huge market fluctuations).  An investor is generally fully exposed, unlike a trader who can quickly cut losses, or lock in profits.   The investor will also not be able to benefit as easily from short term upward movements, while the trader can typically identify and exploit these.  Also traders generally use leverage, so can realise a higher return on investment.  Generally investors make much less than successful traders, and also assume more market risk (which is a function of time in trending markets).

Again, investment is generally more capital intensive than trading. A number of government studies have focussed on day traders and commodity speculators, and a large percentage of participants lose everything they trade with.  Generally investors who have properly diversified their risk will not suffer this fate.  Having said that, there are many long term investors who have lost substantial amounts of their investments.

Conclusion

Being a trader is not for everyone.  An upcoming article will focus on the mental characteristics of successful traders.  Both owning a business and investment also offer opportunities, particularly if you have already accumulated substantial capital.  The risks and time commitment of running a business should not be underestimated. In all cases, some risks can be mitigated by doing your homework.  Trading is a learned skill and a mental attitude and offers prospects for substantial gain with minimal capital.

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Tags: Business owner, investor, trading and investment, Why Trade?

This entry was posted on Friday, March 21st, 2008 at 4:03 am and is filed under Why Trade?. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.