Shi Zheng wrote a post · Sep 25, 2024 01:22

Importance of identifying yourself as a Trader or an Investor, for every trade

Identifying whther you are a trader or an investor is crucial to aligning your decisions with your goals and strategy. Traders Speculate, Investors Valuate.

It may sound straightforward, but in realisty, many people dont clearly define their approach when they initiate a position. This lack of clarity often leads to decisions that contradict their intended strategy, resulting in uncecessary losses.

As a trader, speculate on price movements, knowing your predictions can be invalidated.

As an investor, focus in intrinsic value of stock, your sentiment should only shift in responses to the fundamental/structural changes within the company.

Most of us dall somewhere between these two categories, which causes confusion. We panic when price drop, and turns greedy when price rises. Traders may hold stock too long during trend reversal, convicing themselves that company’s fundamentals are sound and they should just lower their stop loss. Investors might exit too soon after a recovery, simply relieved to breakeven.

Define your approach in each trade and stick to it, this ensures your decision remains consistent with your goals.

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