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Trading and Investing
"After one full year of online day trading, I've come to an important conclusion: it is not as profitable as investing for the longer term, at least for me. After carefully analyzing my hundreds of trades and my monthly statements, it was apparent that several "buys" and "Holds" this spring accounted for the bulk of my profits, while the day trades whittled away at those gains, slowly but surely."
--Jeff Schatz, from a note for Motley Fools.
Perhaps there are thousands who have had the same experience in day trading but who haven't drawn quite the same conclusion. In the discussion below, you'll find out about some crucial differences between "trading" and "investing," and about why Technical Analysis in AASTOCKS is so important as strategic information engine helps make the difference between a gain and a loss.
Often when people talk about investing, they think of putting money into a company stock and holding it for a long time until they realize a significant gain. From this view, put simply, investing is to "buy and hold." In reality, people also use the term "invest" to describe mid-term and long-term stock acquisition. Mid and long-term investors will study stock fundamentals such as a company's earnings report, a company's relative strength in its industry sector, new product lines, technological innovation, or new management teams or strategies. They also look at stock charts and use basic technical analysis combined with overall stock market timing to determine an entry point. Then, having done all this, they may sit back without worrying too much about short-term market fluctuation, secure in their assessment of company performance prospects and in the reliability of their own research conclusions.
In another kind of trading, short-term traders attempt to buy low and sell high, not focusing as much on company fundamentals as long-term investors tend to do. Besides buying and selling, short-term traders can also "short a stock" (sell high, buy low) if they think the stock is going to go down in the near future. Thus, short-term traders may seem to care very little about conventional indicators. What they do care about is market volatility, the rising and falling of stock values, for the more ups and downs a stock has, they more money they believe they can make, getting in and out fast to take a quick (and potentially significant) profit. That is why they love Internet stocks so much!
Now, even though we've drawn a distinction between investing and trading, they do have much in common. In the Internet age, everything moves faster. Market cycles are shorter. Many stocks are now technology driven, due to the strong influence of e-commerce on business development. New technology deployments can trigger success or failure in whole market sectors; therefore, long-term investors too must now focus on a closer time-horizon, alert to ways of minimizing risk from powerful short-term changes. These market transformations also means that for short-term traders to decrease their own balance-sheet volatility, they need knowledge not just of rumored trends but of company fundamentals and big-picture market variables.
Whether you are focusing on long-term
investing goals or on short-term profit, one kind of information is critical: Buy/Sell Points. As described in
Section One ("Getting Started"), technical analysis
plays a crucial role in assessing trading opportunities. At AASTOCKS,
we believe that both long-term investors and short-term traders should use technical analysis as a critical tool
in determining trading decisions and strategy. In the recent past, without
essential evaluation tools conveniently at hand, Technical Analysis was
tedious, complicated, and time consuming, only for specialists. Now, AASTOCKS innovative search engine
applies proprietary mathematical algorithms and neural networks to stock prices
and volumes, enabling you to accurately spot promising signals, assess risk,
and test trading strategies historically. This is the age when you can leave
the forbidding technical work to AASTOCKS
stock search engine while you enjoy the fun of trading and investing!
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