What is trading, and how does it differ from investing?

Where the profit comes from in each

An investor buys a share of something that produces value: a company that earns, a property that is let. Their patience is paid because the thing itself grows.

A trader is not waiting for growth. They are betting on the difference in price between two moments. Which is why they can profit in a falling market as well as a rising one - something a traditional investor cannot.

The cost is that their profit comes from movement alone, and when markets do not move there is nothing to make it from.

The difference that decides it: leverage

Someone investing a thousand dollars owns a thousand. Someone trading a thousand dollars may open a position worth a hundred thousand using leverage.

That is what lets trading multiply a small account - and wipe it out in a single day. An investor who was wrong waits and recovers; a trader who was wrong at high leverage has no account left to wait with.

Read: Leverage and Margin.

Trading is not one thing

• Day trading - in and out the same day, nothing held overnight.
• Swing trading - a position held for days or weeks.
• Scalping - minutes, sometimes seconds.

None is better than another. Which suits you is decided by your time and your temperament, not by the returns advertised. We set them out on the trading styles page.

And why most lose

Brokers licensed in Europe are required to publish the percentage of their clients who lose money, and the figure runs between 70 and 80%. That is not scaremongering - it is a number published by law.

And the cause is usually not poor analysis but position size: one oversized trade erases twenty correct ones. Which is why risk management comes before strategy in this guide, not after it.

So should you start?

If your aim is long-term saving, investing is simpler, cheaper, and needs no daily attention.

And if you do want to trade, start in the right order - set out on the How do you start trading from zero? page - and with an amount that could vanish entirely without changing anything in your life.

This site sells no signals and no courses. It is a real account, open, where the loss is published exactly as the profit is, so you can judge for yourself.