Stock trader versus stock investor

Individuals or firms trading equity (stock) on the stock markets as their principal capacity are called stock traders. Stock traders usually try to profit from short-term price volatility with trades lasting anywhere from several seconds to several weeks.

The stock trader is usually a professional. A person can call themself a full or part-time stock trader/investor while maintaining other professions. When a stock trader/investor has clients, and acts as a money manager or adviser with the intention of adding value to their clients finances, they are also called a financial advisor or manager.

In this case, the financial manager could be an independent professional or a large bank corporation employee. This may include managers dealing with investment funds, hedge funds, mutual funds, and pension funds, or other professionals in equity investment, fund management, and wealth management. Several different types of stock trading exist including day trading, swing trading, market making, scalping (trading), momentum trading, trading the news, and arbitrage.

Stock Investors
On the other hand, stock investors purchase stocks with the intention of holding for an extended period of time, usually several months to years. They rely primarily on fundamental analysis for their investment decisions and fully recognize stock shares as part-ownership in the company.

Many investors believe in the buy and hold strategy, which as the name suggests, implies that investors will hold stocks for the very long term, generally measured in years. This strategy was made popular in the equity bull market of the 1980s and 90s where buy-and-hold investors rode out short-term market declines and continued to hold as the market returned to its previous highs and beyond.

However, during the 2001-2003 equity bear market, the buy-and-hold strategy lost some followers as broader market indexes like the NASDAQ saw their values decline by over 60%.

Stock Traders
Stock traders/investors usually need a stock broker such as a bank or a brokerage firm to access the stock market. Since the advent of Internet banking, an Internet connection is commonly used to manage positions. Using the Internet, specialized software, and a personal computer, stock traders/investors make use of technical analysis and fundamental analysis to help them in the decision-making process.

They may use several information resources. Some of these resources are strictly technical. Using the pivot points calculated from a previous day trading, traders are able to predict the buy and sell points of the current day trading session. This pivot points give a cue to traders as to where price will head for the day; signalling the trader where to enter his trade, and where to exit. There are criticism on the validity of these technical indicators used in technical analysis, and many professional stock traders do not use them.

Many full-time stock traders and stock investors have a formal education of some sort in fields like economics, mathematics and computer science, which are, in general, particularly relevant for this occupation.