Trading Versus Investing

Beyond The Hype views investing and trading as being driven by two different sets of philosophies and mindsets. Long term investing is mostly about picking good stocks and having a good temperament to hold onto the stocks in spite of short-term price fluctuations. Whereas trading is mostly about understanding and anticipating investor psychology around specific stocks and how specific events are likely to move these stocks.

Buying and selling stocks (or any other investments) is about understanding three different things:

• If and when to buy a certain stock

• Far more importantly, if and when to sell certain stock

• And, sometimes, what, if anything, to do between the time one buys a stock and the time one sells that stock

For a trade, one is typically looking for a quick short term returns of a few percentage points. The entry point is critical as the trade is being made on certain news and market sentiment playing out. For example, it may not make much sense to buy a stock 90 days ahead of ea…