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Sunday, April 22, 2007

Investor & Trader Similarity (Stock picking)





Ever since these two terms come into existence, there are arguments of which is the better among the two. Not only that, the list of differences among the two goes on and on. From time frame to stock picks to method of play, differences after differences were listed out. Pros and cons of the two schools of thought were being raised. But for now, let us put all the differences aside and let us look into the basis and find the similarities, shall we?


I’m sure some of you will be thinking,” Wow…. Wait a minute…. Investors and traders… Similarities?” Actually there are a few, not to mention that both are to make money through stocks… Agreed? Haha… This is one similarity already… How about that for a good start?

Ok… Now we move on to some more serious ones…. Let us look at stock pick.Basically we say that investors and traders choose their stocks using different methods right? We say investors use Fundamental Analysis (FA) but traders uses Technical Analysis (TA), right? I’m sure you will agree if I say TA is made up of methods and tools to assess the interest or demand of the crowd towards a particular stock, by using MACD, EMA, RSI, etc. There is no doubt about that. This is what people call as the “Trader’s Style”, to buy a stock that is in demand. Now, investors actually also do the same thing, only the method they use is different. They use FA instead of TA. Why do I say that? Let us look into the basis of FA. FA is composed of areas like earnings, P/E ratio, ROE, NTA, etc. Actually, what are these methods measuring? It is to assess if the company is fundamentally strong. Correct? Now, why do investors choose fundamentally strong company? Have you ever wondered what are the real reasons behind that? Well, some say that they want to make sure the company is strong and is earning money. Well, that may be the reason, but actually investors uses FA to value a company’s performance in order that they will be able to select a company which will have price appreciation in the future because the demand for their stocks will increase. They believe that a fundamentally strong company will continue to become stronger and as time goes, the demand will always be on the hike. So, the price will go up together with the demand in the long run. Which means FA is the same as TA, they are used to decide if the stock will be in demand. And both investors and traders choose stocks that will be in demand... The only difference is the time frame… FA looks a lot further into the future.



So actually, there is a similarity when it comes to stock picking among investors and traders, both pick a company with the believe that the price of the counter will go up after their entry due to the increase in demand. There are a few other similarities that will be posted in the future… In the mean time, let us embrace both our investing and trading brothers and sisters in understanding and peace... hehe...

10 comments:

Ben Gan said...

Inspite of similarities, there are great differences. Chief of which is that most, if not all, investors make money. Wheares, in trading 90% loses. So the fact remains that to invest is easy to win and to trade is easy to lose. Unless you are really skilful and competent, it is much better to choose the safer route.

grahamsmun said...

Is the stats true ?
Where is the ref ?
Then why bother to trade when the odds are so low ?

RL said...

Haha.. Thanks for the comments, i believe that the reason so many traders loose money because timing is important in trading as Technical analysis that is used by traders are for timing of entry and exit. However, to use TA properly, it requires the trader to remain competent and a lot of learning. Learning sounds easy but is avoided by most people. that is why the failure rate is so high.
Investment on the other hand, as it is a long term kind of thing, it uses time to dilute out the loses. so technically, you can say the chances they loose money will reduce significantly.

In short, i believe both ways have the same chances of making money, provided traders are willing to LEARN...

Unknown said...

Their Standard reply - "You buy, sell or hold at your own risk absolutely."
Then the say "Never blame others for your own action."

I still caution everyone

BEWARE _ BE CAREFUL _ YOU MAY THINK THE INFORMATION HERE IS INFORMATIVE AND CAN MAKE YOU MONEY _ DON'T.

MANY SUCH BLOGS HAVE MADE PEOPLE POORER>
MAXFORCE - AND BURSAMASTER - THE SAME. READ THEIR CALLS IN BURSAMASTER's BLOG.

THEY CALL FOR A BUY AFTER THEY HAVE BOUGHT SO THAT YOU CAN HELP TO PUSH UP THE PRICE FOR THEM> THEY HARDLY EVER TELL YOU WHEN TO SELL UNLESS THEY WANT YOU TO SELL BACK TO THEM AT LOW PRICES > DO YOU KNOW WHY? BECAUSE WHILE YOU ARE BUYING THEY ARE SELLING> AFTER THAT WHEN PRICE COMES DOWN< THEY SAID MARKET CORRECTION-HEALTHY OR "OPERATOR" COLLECTING AND THE PUSH WILL COME SOON>

TYPICAL TRICKS.


SO BE CAREFUL BE WARY OF MAXFORCE

Unknown said...

Their Standard reply - "You buy, sell or hold at your own risk absolutely."
Then the say "Never blame others for your own action."

I still caution everyone

BEWARE _ BE CAREFUL _ YOU MAY THINK THE INFORMATION HERE IS INFORMATIVE AND CAN MAKE YOU MONEY _ DON'T.

MANY SUCH BLOGS HAVE MADE PEOPLE POORER>
MAXFORCE - AND BURSAMASTER - THE SAME. READ THEIR CALLS IN BURSAMASTER's BLOG.

THEY CALL FOR A BUY AFTER THEY HAVE BOUGHT SO THAT YOU CAN HELP TO PUSH UP THE PRICE FOR THEM> THEY HARDLY EVER TELL YOU WHEN TO SELL UNLESS THEY WANT YOU TO SELL BACK TO THEM AT LOW PRICES > DO YOU KNOW WHY? BECAUSE WHILE YOU ARE BUYING THEY ARE SELLING> AFTER THAT WHEN PRICE COMES DOWN< THEY SAID MARKET CORRECTION-HEALTHY OR "OPERATOR" COLLECTING AND THE PUSH WILL COME SOON>

TYPICAL TRICKS.


SO BE CAREFUL BE WARY OF MAXFORCE

Unknown said...

Their Standard reply - "You buy, sell or hold at your own risk absolutely."
Then the say "Never blame others for your own action."

I still caution everyone

BEWARE _ BE CAREFUL _ YOU MAY THINK THE INFORMATION HERE IS INFORMATIVE AND CAN MAKE YOU MONEY _ DON'T.

MANY SUCH BLOGS HAVE MADE PEOPLE POORER>
MAXFORCE - AND BURSAMASTER - THE SAME. READ THEIR CALLS IN BURSAMASTER's BLOG.

THEY CALL FOR A BUY AFTER THEY HAVE BOUGHT SO THAT YOU CAN HELP TO PUSH UP THE PRICE FOR THEM> THEY HARDLY EVER TELL YOU WHEN TO SELL UNLESS THEY WANT YOU TO SELL BACK TO THEM AT LOW PRICES > DO YOU KNOW WHY? BECAUSE WHILE YOU ARE BUYING THEY ARE SELLING> AFTER THAT WHEN PRICE COMES DOWN< THEY SAID MARKET CORRECTION-HEALTHY OR "OPERATOR" COLLECTING AND THE PUSH WILL COME SOON>

TYPICAL TRICKS.


SO BE CAREFUL BE WARY OF MAXFORCE

Unknown said...

Their Standard reply - "You buy, sell or hold at your own risk absolutely."
Then the say "Never blame others for your own action."

I still caution everyone

BEWARE _ BE CAREFUL _ YOU MAY THINK THE INFORMATION HERE IS INFORMATIVE AND CAN MAKE YOU MONEY _ DON'T.

MANY SUCH BLOGS HAVE MADE PEOPLE POORER>
MAXFORCE - AND BURSAMASTER - THE SAME. READ THEIR CALLS IN BURSAMASTER's BLOG.

THEY CALL FOR A BUY AFTER THEY HAVE BOUGHT SO THAT YOU CAN HELP TO PUSH UP THE PRICE FOR THEM> THEY HARDLY EVER TELL YOU WHEN TO SELL UNLESS THEY WANT YOU TO SELL BACK TO THEM AT LOW PRICES > DO YOU KNOW WHY? BECAUSE WHILE YOU ARE BUYING THEY ARE SELLING> AFTER THAT WHEN PRICE COMES DOWN< THEY SAID MARKET CORRECTION-HEALTHY OR "OPERATOR" COLLECTING AND THE PUSH WILL COME SOON>

TYPICAL TRICKS.


SO BE CAREFUL BE WARY OF MAXFORCE

Anonymous said...

oops ... investors and traders are different

Investors are catergorised as value investor and growth investor.

if you are a value investor, you tend to purchase a company which is undervalue base on the Dividen payout, Free cash flow.

:) as value investor, we only purhase the company if the price of the market is below the value safety margin.

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