ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

What Is The Difference Between A Trader And An Investor

Updated on June 27, 2017

Are you a trader or an investor? The difference

Many people are confused about the role of a trader and an investor. They think that they can only be one or the other. This misconception limits their perspective in learning to acquire the required financial knowledge. The truth is, a trader can be an investor, and at the same time, an investor can also be a trader. However, a successful trader may not be a successful investor and a successful investor may not be a successful trader.

A trader and/or investor is an individual who engages in the transfer of financial assets in any financial market, either for themselves or on behalf of someone else. The main difference between a trader and an investor is the duration for which the person holds the asset. Investors tend to have a longer-term time horizon, whereas traders tend to hold assets for shorter periods of time in order to capitalize on short-term trends.

This diagram shows the scale of intensity from zero or negative to maximum as it progresses from left to right for people who only save money in the cash, invest or trade financial securities. The second part of the diagram shows the different components that can be fit into the scale. For example, in terms of profit, as we see in the diagram, money you save in the bank will only give you limited interest. A person who saves his money in the bank gains zero or even negative profit from it. But why? Taking Australia as an example, the interest rate now is around 3%, which is very close to the inflation rate. Almost all the money made from the interest rate will be balanced up by the inflation rate. Inflation is the constant increase of prices for general goods and services, causing a decline of the value of money over time. Furthermore, countries such as Switzerland, Sweden and Japan are imposing negative interest rates on their citizens. Instead of receiving money on deposits, depositors must pay regularly to keep their money with the bank. With just a little bit of guidance and knowledge, you can easily start investing into a security that generates a return higher than saving your money in the bank. Nevertheless, a trader would generally make more profit in a short term time frame compared to an investor. That is because a trader captures more opportunities by obtaining additional information and analysis of the market.

Other than the profit, other components can be fit into the diagram as well. One example is the risk profile. Investing incurs lower risks compared to trading. Traders tend to sneak in and out of the market quickly to get the quick profit. Trading is subject to the market volatility and can be wiped out instantly without critical thinking and quick judgement. Hence traders generally require higher skill level, more time and more effort in their training to do well in the market. Investors, on the other hand, tend to hold on to their positions for a longer time. They are not affected as easily by market volatility as much as traders.

Trading Terms

The trading terms are characterised by the period you hold your investment. Clearly, day trading means you trade and close on the same day.

Fast in, fast out. Day traders will open a couple of trades within the day and close them before the market closes. The short term will be typically 1–3 months, while long term can be more than 3 months to years. Generally people defined themselves as an investor if they are holding a particular security for more than 3 months.

The most important question to ask yourself is, what time commitment are you wanting and willing to give? The decision would depend on your life goals and current lifestyle. Can you sit in front of computer 8 hours every day to analyse the market? Maybe you would only want to look at the market once every day or once every week. Or you might have a full time job and just want to analyse the market for 15 minutes every day. In addition, your risk acceptance level may be high or low. All these factors contribute to the type of trading which is best suited to your needs and goals - short term, medium term or long term trading (investing).


    0 of 8192 characters used
    Post Comment

    No comments yet.


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
    ClickscoThis is a data management platform studying reader behavior (Privacy Policy)