| A stock trader or a stock investor is an individual or | | | | According to the trading techniques and strategy |
| firm who buys and sells financial instruments (such as | | | | adopted, or the investing profile of each individual, its |
| stocks or bonds) in the financial markets. | | | | trading style can be called value investing, growth |
| Stock Trader vs. Stock Investor | | | | investing, day trading, swing trading, or trend |
| The difference between stock traders and stock | | | | following. |
| investors is that stock investors tend generally to | | | | Expenses, costs and risk |
| buy great companies (blue chips). They tend to | | | | Trading activities are not free. First of all, they have |
| invest for the long-term and count upon compounded | | | | a considerably high level of risk, uncertainty and |
| business growth to provide their returns. Stock | | | | complexity, especially for unwise and inexperienced |
| traders, on the other hand, usually try to profit from | | | | stock traders/investors seeking for an easy way to |
| short-term price volatility. Sometimes they try to rely | | | | make money quickly. In addition, stock traders |
| upon the psychology of other investors. | | | | investors face several costs such as commissions, |
| Individuals or firms trading as their principal capacity | | | | taxes and fees to be paid for the brokerage and |
| are called stock traders or simply traders. The stock | | | | other services, like the buying/selling orders placed at |
| trader is usually a professional. Many people across | | | | the stock exchange. According to each National or |
| the world can call themselves stock traders/investors | | | | State legislation, a large array of fiscal obligations |
| or part-time stock traders/investors, despite having | | | | must be respected, and taxes are charged by the |
| another profession in parallel with their regular trading | | | | State over the transactions and earnings. Beyond |
| activities in the financial markets. When a stock | | | | these costs, the opportunity costs of money and |
| trader/investor has clients, and acts as a money | | | | time, the currency risk, the financial risk, and all the |
| manager or adviser with the intention of adding value | | | | Internet Service Provider, data and news agency |
| to his clients finances, he is also called a financial | | | | services and electricity consumption expenses must |
| adviser or manager. In this case, the financial | | | | be added. |
| manager could be an independent professional or a | | | | Stock Picking |
| large bank corporation employee. This may include | | | | Although many companies offer courses in stock |
| managers dealing with investment funds, hedge | | | | picking, and numerous experts report success |
| funds, mutual funds, and pension funds, or other | | | | through Technical Analysis and Fundamental Analysis, |
| professionals in equity investment and fund | | | | many economists and academics state that because |
| management. A very active stock trader who holds | | | | of Efficient market theory it is unlikely that any |
| positions for a very short time and makes several | | | | amount of analysis can help an investor make any |
| trades each day is a day trader. Other broad or | | | | gains above the stock market itself. In a normal |
| specific designations for different kinds of stock | | | | distribution of investors, many academics believe that |
| traders include the terms: speculator, hedger, | | | | the richest are simply outliers in such a distribution |
| arbitrageur and market maker. | | | | (e.g. in a game of chance, they have flipped heads |
| Methodology | | | | twenty years in a row). |
| Stock traders/investors usually need a stock broker, | | | | For this reason most academics and economists |
| such as a bank or a brokerage firm, as an | | | | recommend that investors invest in funds that follow |
| intermediate. Since the spread of the Internet | | | | an index in the market, i.e. long-term and |
| banking, it is usual to use an Internet connection to | | | | well-diversified investments. |
| manage their own financial portfolios, including | | | | Dart Board Method |
| ordering the sell/buying orders, set stop losses prices | | | | Financial journals and newspapers such as the Wall |
| and define buying/selling prices. Using the Internet, | | | | Street Journal have done articles on stock picking in |
| specialized software and a personal computer, stock | | | | the past. One famous article involved a stock picking |
| traders/investors make use of technical analysis and | | | | contest between a panel of Wall Street experts, the |
| fundamental analysis to help them in the decision | | | | public and a dart board. One member was elected to |
| process. They utilize also several advising and | | | | throw darts at the Journal's stock page in order to |
| information resources based on the Internet and the | | | | select a portfolio. At the end of the experiment, the |
| media, such as financial/business news and data firms | | | | public and the dart board both beat the board of |
| (Reuters, Bloomberg, Financial Times, Yahoo! Finance, | | | | Wall Street experts. Was the dart board more |
| MSN Money, AFX News, Newratings, Forbes, | | | | savvy? The dart board's triumph over the Wall |
| BusinessWeek, Hoover's). They exclusively trade on | | | | Street experts can be attributed to chance (one |
| their own behalf, as a principal, investing money on a | | | | could also attribute the dart board losing to the |
| share or other financial instrument, which they believe | | | | experts to chance as well). |
| will increase in price aiming to sell it later with earnings. | | | | |