Basic Information on Trading & Investing

Trading is when you try to earn a profit from small (daily or monthly) movements of the markets which affect the price of shares and you buy-sell or short sell them. Here then, the focus is not a particular company's fundamentals but usually a speculation or news about an event that may or may not take place. Trading thus, since it takes into account the high volatility of the market is very risky and thus requires a person to continually monitor the markets to determine the optimum time to buy low and sell high.

At the same time investing takes a longer term perspective on share prices. This time period can range from 5 to 10 years or more and is based more on the company's core values and fundamentals than small bubbles that come and go. Thus an investor is not affected by the short-term volatility of the share prices or of the market movements and instead is more concerned on the growth factors which help a company develop and expand.

Thus, before buying shares of a company, one needs to see if one intends to be an investor or a trader and take decisions accordingly, since small volatilities affect a trader drastically and growth factors affect an investor.

Once financial goals (short/long) have been considered, one must read up as much as they can about the market and its various nuances. Even after that, if one is not confident, one can try their hand at virtual/paper trading and see how well they are able to fare against the market. Once one is sure, that one is able to assess market movements and reach accordingly, one may proceed to the real world of equity trading starting with small sums of money and slowly moving up to large corpuses for investing or for trading as one desires.