Is there a difference between a trader and an investor?
Many traders will say that a trader is NOT an investor. Many traders do not care about the fundamentals and many of their trades stick strictly to rules established through technical charting.
For myself, I keep ahead of economic news, research the fundamentals on stocks and basically try to get a feel of the market environment. It makes trading more fun, intellectually challenging and justifies my MBA training and years in the business world.
Longer term stocks move up because it provides superior value. It must be a better product with superior managers who know how to add value for their shareholders.
Nevertheless, I remarked to someone today while playing tennis that in order to invest, it is important that you learn to trade. You need to grasp the basic principles of trading especially those in regards to mental discipline and risk management.
Stocks can move in directions completely contrary to fundamentals. Stocks can be irrational longer than you can remain solvent. Never fall in love with your fundamental analysis which is complicated, usually flawed, often biased, seldom complete and it often it takes a longer time to reflect its value.
Thus, it is important to learn the skills regarding when to enter and exit, how to handle risk and manage money. Use your trading rules to confirm the fundamentals before entering a trade.
My opinion is that a combination of fundamentals and trading gives one an edge. Use fundamentals to decide strategies for stocks but use your trading system to decide your own short term directions. Both skills are complementary and can be used to direct your strategies and trading decisions.
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