• Understanding Fundamental Analysis

The way speculators, traders, and investors think

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• Apr 27 2024

How an investor thinks : The way speculators, traders, and investors think

You can speculate, trade, or invest in the market, depending on how you want to play. There are three different kinds of involvement. One has to decide what kind of market member they want to be. Getting clear on this can have a big effect on his Profit & Loss account.

• Speculator

  To make short-term gains from changes in market prices, someone is a speculator. Speculators often take on more risk than investors because their plans depend a lot on guessing when the market will go up or down. To make money off of changes in the market, they might use tools like options, leverage, and short-selling. Speculators usually only have a short time to invest, and they might not care about the fundamentals of the things they trade.

• Trader

  There are people called traders who buy and sell stocks, bonds, commodities, and currencies with the goal of getting money off of short-term price changes. Traders can work in many markets, such as forex, stocks, options, futures, and cryptocurrencies. They trade in different ways, such as day trading, which means buying and selling within the same day, swing trading, which means keeping positions for a few days to weeks, and position trading, which means holding positions for weeks to months. Traders may make trading choices based on technical analysis, chart patterns, and market indicators more than speculators, though fundamental analysis can also be a part of their strategy.

• Investor

  An investor is someone who puts money into something with the hope of getting money back in the long run. When investors decide what to buy, they usually look at the basics of the product, like the company's finances, industry trends, the quality of the management, and economic indicators. They often look at things over a longer period of time, like years or even decades, and may put growth potential, dividend income, or value increase at the top of their list of priorities. Instead of focusing on short-term price changes like gamblers and traders do, investors tend to care more about the assets they hold and how well they perform.