If you’re going to invest, you have to make trades. It is the only way to get into the market. But traders do not necessarily invest. It all comes down to the length of time you want your money in the market. Interested in another take on the difference between investing and trading? Read This: Trading vs Investing (and Today’s Bounce) (The Big Picture).
1. Make sure you understand what your holding period is before you establish any position.
2. Traders should NEVER let any losing trade turn into an investment.
3. Strong investments should be given the benefit of the doubt, rather than taking the quick profit.
4. Winning trades should be allowed to run, but require a new exit strategy.
Trading vs Investing (and Today’s Bounce)
Barry Ritholtz – The Big Picture
When I saw this post on Ritholz’s blog, I couldn’t help thinking that he, a professional money manager with longer holding periods, had made a short term trade recently that didn’t work out and he turned it into an investment with disasterous results. Was he talking to himself? Just wondering.
Possibly…or one of his close colleagues. We’ve all done it from time to time (turning a short term trade into a long term disaster), and with the recent weakness in some sectors, I’m sure there are more traders out there with unrealized losses right now.