Are You a Trader or an Investor?
Sounds like a confusing question, doesn’t it? Trading and investing are two terms that are used so interchangeably that it’s difficult to know the difference. In the language of the stock market, there is a big difference; and for those that confuse stock trading and long term investing, the difference can be painful.

There isn’t a big secret about the difference between the two. First, it is important to say that neither is bad nor wrong. Each is a different approach in a stock trading plan and the problem enters when someone starts out with one philosophy and switches to the other

Let’s start with the difference between stock trading and investing long term in a company:

• If you come to the conclusion that you should purchase a particular stock because of your technical analysis, you are trading stocks.
  
  
• If you come to the conclusion that you should purchase stock because of your fundamental analysis of the company’s future prospects, you are long-term investing.
  
  
• If you buy or sell stocks because of short-term movements in stock prices, you are trading stocks.
  
  
• If you don’t sell struggling stocks because the outlook says "this is just a temporary downturn", you are long-term investing.
  
  
• If your only interest in companies is whether you should make a quick purchase or sale of hot stocks, you are trading stocks.
  
  
• If your interest in a company is its impact on your stock portfolio, you are long-term investing.

Simply put, if you invest in stocks, you are a stock trader; if you invest in companies, you are a long-term investor. Again, neither of these philosophies is bad, both are looking for profit, just in different ways. The confusion between these two starts not when things are good, but when things get difficult. To make money investing in stock when things go bad, it is important to have stop loss strategies in place. Stock trading says to set a percent target and sell the stock if it reaches that level to minimize the loss. Long-term investing looks to first determine the reason for the fall, and then decide what the long-term impact on their portfolio is. If it outlook is bright, the investor will probably stay with the stock. If the future is bleak, it may be time to sell.

The problem is actually more of an emotional issue of greed and fear than anything. Since stock traders usually look at the daily trends and long-term investors focus on forecasts, making decisions outside of their expertise can be costly. If a stock trader decides to hold a struggling stock, he or she is less likely to understand the dynamics behind a downturn. If a long-term investor decides to quick-sell, he or she may miss the long-term implications by forsaking the investment philosophy.

Whether you choose to be a stock trader or a long-term investor, it is important to develop a solid stock trading system or stock investing system that coincides with your decisions and goals. Being a short-term trader or long-term investor is great, just be sure you know the difference!

Utilizing candlestick signals tells a different story. This steady uptrend, for the past seven months, has already witnessed profit taking during the uptrend. The candlestick signals clearly revealed when selling would occur at the top of a trading channel and when buying occurred at the bottom of the trend channel. The fact that this market has moved in a slow oscillating uptrend indicates profit taking was occurring on a constant basis. This is a very healthy market. It has had an unusually long sustained uptrend. The length of the uptrend is a function of steady buying intermingled with profit taking versus a strong upward trend that did not experience any profit taking.

Will there be a correction? Probably, but if you have positioned your portfolio based upon the expectation of a pullback, a good percentage profit would have been missed. Let the market tell you what the market is doing. There has not been any evidence that the sellers were taking control at any point. Having the ability to analyze what the candlestick signals were telling us (or not telling us) is a valuable tool for maintaining positions, not pulling money out of the markets based upon what "should be" happening. The candlestick signals reveal when a reversal is occurring. Just as effectively, the candlestick signals also reveal when a major reversal is not occurring. The information incorporated into the signals is a very valuable analytical trend tool.

DOW

Understanding what the signals represent makes identifying a high profit patterns easier. CROX is an excellent illustration for knowing what patterns can produce high profits. The past couple of months have seen a Fry Pan Bottom pattern forming. Upon the completion of the formation, there are expected results. Click here for the Candlestick Forum Fry Pan Bottom training CD. The candlestick signals reveal instantly whether those results have occurred. As can be seen in the CROX chart, the Bearish Engulfing signal, at the breakout point revealed that the Fry Pan Bottom signal had not confirmed. However, the bullish signals that appeared after the Bearish Engulfing signal created another common pattern potential, the Cup and Handle formation. Being able to immediately identify the potential of the next formation keeps an investor from completely dismissing a trade and going on to the next one.

The candlestick signals reveal information that can be immediately deciphered. This information incorporated into potential patterns allows an investor to participate in high profit price moves that might not otherwise be recognized.

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