Stock Investing

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• Origins Of PEND

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What is Stock Trading?
How does it differ from Stock Investing?

What is the difference between a trader and an investor?

A trader is someone who trades stocks much like a car-dealer buys and sells cars. In other words, a trader tries to "buy low and sell high" and doesn't necessarily want to know much about the stock.

By this definition, of course, everyone is a trader of sorts - I've yet to meet anyone who buys stocks to lose money.

An investor is someone who buys stocks to hold for a long time - for their retirement for example. In terms of the car analogy, they are more like car-collectors than car-dealers. They learn as much as they can about what they're going to buy and would love to hold their purchases for the long-term. Alternatively, we could picture an investor as a person who buys a stock because they're genuinely interested in receiving the dividends - more interested than they are in selling the stock for a quick profit.

I personally am a trader. I don't buy a stock for its dividend. I buy it because PEND tells me the fundamentals are strong and TREND tells me there is momentum behind the stock.

And I don't stocks with the idea that I'll hold them until I retire. I will hold provided momentum - in the form of an upwardly trending chart - remains positive. And that, sometimes, is for several years.

The time-scales of the price-charts I analyze are measured in months or years. I follow weekly stock prices, not daily stock prices. As a result of these choices, I respond only to major changes in price action rather than daily price movements. *

I would like to hold stocks forever - this reduces costs and there's less work to do - but in practice I always sell when an uptrend breaks. I suppose I could be described as a reluctant trader. I generally hold stocks for many months so, in practice, I am a long-term trader.

If I followed a stock's price-action minute by minute I would almost certainly be a day-trader - looking to buy and sell on the same day. If I followed a stock's daily price-action and looked at trends on a scale of a few days or weeks, I would be a short-term trader.

In practice, most people associate trading with short-term buying and selling determined wholly by technical analysis. I operate over longer time-scales and use fundamental analysis, in the form of PEND, in my stock selection methods.

*Caution: It's important for newcomers to realize that the shorter the trading time-scale, the more likely it is that apparent technical buy and sell signals will be statistical outliers rather than true measures of a trend. This makes short-term trading an exceptionally risky proposition.