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WHAT IS TRADING?

WHAT IS TRADING?

In layman’s language trading is the buying and selling of the goods but in the world of financial markets, trading holds an altogether different meaning. In stock markets, trading involves buying and selling of stock, commodities, currency, derivative products and other instruments. The purpose of trading is to generate profit in the short term by buying at a lower price and selling at a higher price.

When it comes to wealth creation in the stocks market, investing and trading differs on several parameters. The major difference between traders and investor is their objective and mindset: investors think like business owners and wealth creators while traders are speculators.

Imagine that you and your friend bought seeds to sow in your fields. You sold your seeds to someone at a higher price and earned profits in the short term. And your friend sowed the seeds and let them grow for a few years into big trees that bore luscious fruits. By investing his seeds, he made a profit in a different manner than what you made by trading your seeds. This is simply the difference between investing and trading.

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