What is the difference between trading and investing?

• Trading, speculation, and investing may be similar in the basic idea of each of them, which is to risk excess or saved money with the aim of achieving a return, but although both the investor and the trader seek to achieve profit through trading in different financial markets, there is a difference. Between investing and trading in financial markets, each has a different path.
• The difference between the two can be summarized in that investing is using an amount of money to obtain a return from it for long periods of time, while trading generally aims to buy at a lower price and sell at a higher price in order to achieve profits in short periods of time.
• While the investor seeks to achieve greater returns by buying and holding stocks and bonds for a long period, in addition to the possibility of achieving returns without the need to sell the stock or bond, through dividends, for example, in stocks or interest on bonds. On the other hand, the trader benefits from the rise and fall of the markets by buying and Sell for a shorter period of time and make smaller but more frequent profits.

Trading and investing can be differentiated by 5 factors:

1.    Time range: Investors invest their money for relatively longer periods of time. Short-term fluctuations or price movements in the market are not of great importance for long-term investing, as opposed to a trader who most of the time is looking for short-term and recurring profits.
2.  How to earn profits: The trader looks at the movement of stock prices in the market in both directions, up or down, and the trader can benefit from the rise or fall in the prices of stocks or various assets. While the investor is looking for cumulative profit by doubling interest and profits over several years by keeping high-quality stocks and assets in the market.
3. Risk ratio: Both trading and investing involve risks to the capital, but trading contains a relatively higher risk ratio in exchange for higher returns due to daily market fluctuations and the decline and rise of the price in a short period of time. While investing takes some time to develop and involves lower risks and immediate returns compared to trading, it may yield higher returns through accumulating interest and profits if held for a longer period of time as it is not affected by daily market fluctuations.
4.  Minimum allocated capital: or what is called the initial balance to open the account, which is usually the money allocated for investment is greater than the amount allocated for trading, so we may see that stock brokerage companies may require accounts starting from $5,000 to start trading or investing in stocks, while they require Forex brokerage companies have a minimum limit to open an account of only $200.
5. The time allocated to the trading or investment process: By this we mean the time that traders spend following up, analyzing and selecting deals. Unlike investing, trading requires more follow-up time, perhaps not for long periods, but they are frequent despite their shortness due to daily follow-up, which may be more than once during the day and may take about At least two hours a day of the trader’s time. As for long-term investment, less time is required, which may be limited to a few hours weekly or monthly only in searching for investments and identifying appropriate opportunities that are compatible with the established strategy, and perhaps a few minutes for follow-up after that.