Which Do You Choose to Become a Forex Trader or Investor?
It’s better to be a trader or become an investor? Many people issued their opinions about these two statements.
But in this article, we will review it and provide information on the importance of being a trader and also being an investor, both of which do provide opportunities to multiply money
Okay now we will explore in detail about both investors and traders
Understanding of Investors
First, we will discuss with you all related to investor understanding. In the world of investment in general, which is included in the category of investors are people who put their funds into long-term investment instruments. These commonly placed investment instruments include real estate or property, large and small-scale industries, investments in commodity markets or stock markets with the intention of being detained for a long time.
When going to invest in a field, an investor certainly has a basis of consideration. The basis for considering that an investor has is to focus on the product they will buy or the type of business they will enter. For example, a stock investor who will start to invest, then he will choose a company that really has a pretty good performance.
This means that an investor has a truly mature consideration before they decide to enter and start investing in a field.
In classification, an investor is divided become two, namely institutional investors and also individual investors. Institutional investors include banks, financial institutions other than banks, insurance companies, and so on.
While individual investors usually rarely have a clear plan if one day the investment results are losing money. Individual investors have a tendency to cut-loss and switch to other types of investment instruments when they get losses. It could also be that they will let the investment in the hope that its value will rebind and can get profit in the future.
The bad attitude often shown by individual investors is that they often respond to changes in market prices with anxiety and anxiety. For example, when gold prices are decreasing which often occur in each period, individual investors who have a large gold investment value will feel anxious and worried. They are worried that they will get losses from the investments they make.
Even though not all types of individual investors have this attitude. There are also individual investors who are very serious with sophisticated and mature investment planning and strategies. So they can get greater results and sufficient profits for life.
One example of an individual investor who gets success on his investment is Warren Buffet. Due to his tenacity and ability to conduct analysis and investment skills honed since adolescence, he is one of the individual investors who are among the richest people in the world.
Thus being an individual investor is very wide open to make you a rich person and have a lot of wealth.
Definition of Trader
From the explanation above you understand that an investor is very focused on the fundamentals of the product they are going to buy. On the other hand, a trader turns out to focus on the sentiment and market conditions that are happening.
For example, a trader who trades on the stock market does not really care about the performance of the company’s shares they will buy. As long as the market sentiment for the company shows a positive thing, then he will buy the stock for later resale in a fast time.
In addition to sentiment, other things that traders consider are the existing market conditions. If the stock market is hit by a political environment that is not very conducive to the stock price index falls, the trader will not enter the market until market conditions return to normal.
When compared to an investor who conducts transactions over the long term, a trader conducts transactions in the short term and has a much greater frequency than investors.
A survey has been conducted to find out the trading patterns that are carried out, the result is that most traders rely on their income only from trading or the term trading for living both in the stock market, futures stock index, forex and also commodities.
In general, a trader has a very clear and directed method, strategy and plan. This is important because they usually cannot hold trading positions for a long time.
These traders take advantage of stop loss, profit targets, and certain risk/reward ratios with a view to limiting the losses they can receive and also to adjust the benefits to be gained. In addition, they also use techniques in money management with the aim of maximizing profits that may not be used by investors.
A trader who is expert and skilled will enter into existing types of markets such as forex markets, stock markets, commodity or futures markets. One example of a successful trader is George Soros who was the founder of Quantum Funds and became one of the most successful world-class traders
From the explanation above, we can conclude that there are some differences between investors and traders that are quite important. The first difference is that investors have a focus on the fundamentals of an asset that they will invest, while a trader has a consideration of market sentiment and conditions before they enter and trade.
The second difference is a trader has a tendency to make transactions in the short term, while investors have planned and investing in a long period of time.
Investors usually play passively He looks for returns in the future, low stress, playing long term, not affected by short-term conditions. The analysis used consists of fundamentals, business analysis and financial reports, but a little technical. Most investors buy shares to be kept for a very long time, for example, Warren Buffet. If they save in the long run when stocks go down they instead increase their position and not sell it.
One of the success formulas of investing in the long term, especially in mutual funds, is to use the dollar cost averaging method (in Indonesia it may be precisely the Rupiah cost averaging). Which means, no matter the market or exchange goes up or down, we will invest regularly every month. So that in the long run, what we get is the average value of our investment. Investors see the compound growth of their portfolios in the long run.
Try to invest $ 20 million and get a return of 20% per year. Then in 20 years, your money will be $ 766 million. Now if you invest $ 50 million it will be almost $ 2 billion. A simple example, if someone has the soul of an investor has a rich parent, he just asks for $ 50 million to his parents then he waits 20 years while going to school. After 20 years, he can immediately become a billionaire without having to work hard.
What about traders? A trader will usually play actively looking for fast returns in the present. He tends to be more stressed, short-term trading and very affected by prices. An analysis that is often used is technically full and a little fundamental. The usage is accompanied by a tight stop loss.
Traders do not store shares or foreign exchange but “play” in the short term can even be in a very short term such as buying morning selling (intraday trader). If the price is against what he wants then the trader must do a “cut loss”. For traders doing cut, a loss is a rescue action.
It’s funny that a lot of people have learned about how to plan finances well and many have understood that investment is for the long term. But what’s the power, maybe trading transactions aka trading feels cooler than sitting quietly surrendering following the up and down market prices. Maybe that’s why someone prefers to be a trader.