If you are to be successful in arriving at any particular destination, it is not enough to know where the final destination is; you also need to know exactly how to get there. Hence, if you need to get to Mario’s Chip Shop, a map might be handy. That’s not all that there is to it, though. You also need to know what sort of map. You might require a different map if you are going to fly there, or if you are much further away; than if you are driving. Your decision will also be influenced by your resources. Can you afford the flight, or are you going to have to drive all 1500 miles? We can go at this for ages…but I am sure you get the point. You have to know where you are, what resources you have, what sort of person you are; before you can begin your journey to the Chip Shop.

If you wish to make profits off the Markets – e.g. Stocks, Options, Commodities, and Forex, of course – then you need to know exactly how you are going to go about doing that…your approach. In general, you buy an item, hold onto it until it gains in value, then you sell it and make a profit (in Forex Trading, one currency is always on the Buy side, so this still applies). If it is a long term investment, you might never actually sell it. However, the value of the amount you own should still rise in perceived value. This might also take on a slightly different dimension when you try to make profits from the interest you might earn from owning the item in question. There are also dividends that companies pay out if you own their stock. All of these come into play, but the general model still holds.

People see the above goal differently…for different reasons. Some people will buy a company’s stock, and hold onto it indefinitely, through ups and downs etc. Such a person would be an investor. They hold onto the item for a relatively “long” period of time. A trader is more opportunistic. They might buy the same stock, but would sell (or short) it when it’s value goes down, then perhaps buy again if they think it is going back up. Investors tend to be in it for the comparatively long haul; traders, while not necessarily short term players, tend to be more willing to drop the item if the market dictates. The trader tends to be more active. The distinction is quite important, as it can influence how either of them uses the same piece of information.

You see on the Markets everyday in this economy. Some bad news comes out, and the traders sell. They have no attachment to the stocks, they have an attachment to profit. The investors are much more likely to hold on, for whatever reason.

You need to work out what your approach to bring to the whatever market you find yourself trading.