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Trading vs Investing

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@forexbrokr
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Why can't you flip a trade into an investment?

If you call yourself either a trader or an investor, then you must be able to explain what each entail.

Perhaps most importantly, you also have to be able to understand why you can't just flick a trade into an investment.

Let’s explore the concept in greater detail within the blog below:

Hello new traders on LeoFinance

Hi to the endless stream of new traders joining Hive’s LeoFinance community.

As the LeoFinance onboarding experience improves, we’re still seeing a steady stream of introductory posts from new traders as I flick through the trading related tags.

But when it comes to trading vs investing, I can't get over the number of n00bs that I see calling themselves traders with absolutely no idea what the word means.

Let alone what it requires to be successful.

If you're new to the trading game, then please read this post and let the words sink in.

Heck, write them in black texta above your screen on your beautiful white walls.

Think about it in the way that you're better off trashing them with a lesson that will allow you to make more money in the end.

Because I guarantee that if they don't sink in, you're not going to have beautiful white walls to call your own anyway!

Diversification is good, changing your mind is not

You don't have to pigeonhole yourself into one stream or the other.

Diversification is the key to long term success in modern markets.

If you drop your entire account into a single position, then you're quite frankly a moron.

Yep, there you go it’s been said.

Sure, you might make an absolute killing if things go your way.

But you will LOSE EVERYTHING if things go against you.

I don't care how high the odds of the position working out are, the only thing that matters is that one time you lose everything when things don't go your way.

Quite frankly, if you are all in, then you may as well have gone down to the casino and put everything you own on red.

At least you'd be able to pick up a couple of free drinks from a sexy bar chick!

You see new traders come into this game and think that trading/investing is about making money.

It's not.

It's actually about not losing money.

You have to stay in the game and you won't stay in the game if you're always all in.

It doesn't matter whether you call yourself a trader or an investor, if you're all in then you're exactly the same.

The difference between traders and investors

The term 'long term investor' can't be used to justify poor risk management.

If you're successful as either a trader or an investor, then the only thing that you have in common is that you manage risk well.

Take these two examples:

Trader

If you took your position as a trade, then you took it with clearly defined risk parameters such as a stop loss level that if price hit, you knew you were wrong and therefore intended to close it out.

As a trader, ALWAYS respect your stops.

It only takes one time that you don't and your account can be gone in the blink of an eye.

Investor

If you decided to invest a portion of your portfolio into an asset, then just like if it was a trade, you have clearly defined your risk paramaters for that investment.

It might be a little larger, but you have defined your risk and you're comfortable with it.

As you can see, when it comes to risk management both trading and investing is the same.

But now comes the most important part of the risk management of both.

Never changing your mind once you’re in a position.

A trade can never be flipped into an investment.

The most important line in this entire post is about to come. If you take just one thing out of it, then this is it.

YOU CAN'T GO INTO A TRADE AS A TRADER AND COME OUT OF IT AS AN INVESTOR.

I want you to read this again because it has to sink in.

We've all held onto a shitty trade for too long and then justified it to ourselves by saying:

"Actually it was an investment."

"Oh I'm holding this one for the long term."

I want you to read those quotes in the most cliché, bearded coffee shop hipster, pretentious twat voice that you can possibly come up with.

Because that's what you are whenever you lie to yourself and try to justify a shit trade as a long term investment.

It is not a long term investment.

It is just a shitty trade.

That's all it ever was and that's all it ever will be.

Final thoughts on trading vs investing

In wrapping up, this concept is highlighted no place better than when the higher time frame trend in Bitcoin flips from bullish to bearish.

Everyone that entered a long position for whatever reason at the peak, has now found themselves holding at a loss while trying to figure out why Bitcoin crashed today?.

But instead of executing their plan (if they even had one), they have now simply told themselves that it's an investment.

It’s not.

It’s just a shitty trade.

I hope some of my words sink in, because I don't care how promising the tech in this space is, you're always an inch away from blowing your entire account.

Simply learn to manage your risk and then you can call yourself whatever you want.

Just stop flipping between calling yourself a trader and investor to justify your lack of discipline.

Best of probabilities to you.


Direct from the desk of Dane Williams.

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