Many people see investing in stock and trading stock as the same thing, however, depending on the trading strategy that is used, these two concepts are actually different. Investors will buy and hold stock with the hope that their stock will appreciate over a long period of time. These investors are investing in stock. Other investors will engage in stock trading by holding the stock for only a few days, less than one day, and some will even buy stock and sell the same stock several times a day. Stock traders invest money in shares (shareholders) for those stocks that they believe will increase in value over time, and then they sell the shares at a later date to reach a profit. There are a number of different strategies used for trading stock including, value investing and growth, swing trading, day trading, and many more. A brief description of each is described below.
1) For those traders who practice value stock investing, they buy stock with the hope that they are increasing value in the company by purchasing stock in that company. As a result, they purchase shares in those companies that they feel are under-priced and that have room for growth.
2) Growth investing is very similar to value investing, however, investors only by shares in companies that are showing signs of above average growth. The share prices of these stocks are typically more expensive, but the trader predicts that the share value will grow into what it has been purchased for.
3) When trading stock, day traders will only hold stock over 1-2 weeks and they usually trade stock that are actively traded. Swing traders must purchase stocks at the low end and then sell the shares when their value comes back up. This is due to the nature of swing trading in that these stocks typically will swing between very general high and low extremes.
4) The purpose of day trading stock online is to avoid overnight shocks that might occur on the stock market. These stocks are held for a very short period of time so that at the end of the day there is no change in the number of shares held. When trading stock, day traders will sell a share each time another share of equal value is bought with the profit and loss a direct result of the difference between the sale price and the purchasing price of the share.
Investors trading stock will range from the casual trader who may trade as a hobby, to large hedge fund traders who make a living off of investing in the stock market. Trading the stock market is very similar to participating in an auction. Buyers bid on a specific price of a stock after the sellers ask for a starting price. Once the buyer and seller have a price match, then a trade may take place.
For more information regarding trading stock, please visit online forums, online websites that offer trading assistance, and also read a lot of books that can jump-start your stock market online investing education. It is a very competitive industry, but one that you can do well in if you take the time do your homework, and practice your developed trading techniques.