The title of this article might be misleading so let us clarify it. Even though the stock exchange is called a trading market, basic stock trade is just one form of the presence on the market. Different investment strategies define the way a trader makes a profit, and thus their presence differs.
The difference between various strategies may be slight, and it also may be so different that you can’t compare two approaches to the stock trading. The risk is another aspect that differs between the strategies and it is the best way to compare them.
Investing and speculation approach to the stock exchange
These two terms stand on the opposite sides of the trading strategy spectrum. While one strategy focuses on one asset and the dividends it offers, the other focuses on speculations of the future price movements of the assets and active trading.
Investing is mainly done by rich individuals and mutual funds. It’s quite simple; you buy all the stocks from a company and gain a big portion of the ownership. You earn dividends and wait for the breakthrough in the enterprise. Once the company succeeds and the value of their shares skyrockets, you sell them and do that again with another company.
The catch is to find a company that just entered the stock exchange. They also need a high probability of success in the future. This means that you will buy their shares for a pocket change and once the make a breakthrough their shares will gain value, and you will be able to sell them for enormous profit.
Speculation is the opposite of the investing, and it carries a huge risk. Traders that speculate on the stock market use little to no data in their trading strategies. They hear rumors about a company, and they buy their shares. The majority of speculators lose their money in the first week of trading. Some of the give up while others go through online courses and come back to the market as traders with some basic knowledge about stocks.
Those that give up after their initial loss either give up on trading as whole or turn to binary options due to their simplicity. Binary options come with software that helps them in trading. There is software that analyses the info and comes up with trades that have a high chance of ending in profit.
The primary form of trading on the stock market
A speculator that comes to his senses has to go through education and practice to become a standard binary options trader. This process may last for several months, but once an individual goes through it, they gain necessary skills to make money through stock trading.
A trader has to do their research about the company and its shares before they invest their money in it. This research phase may last several days, and in the end, it might yield nothing. A good trader knows when to give up on a stock and when to go against logic and invest in it.
You can also use robots (ranked by their customers at Top 7 Binary Robots) to make things even easier.