Monday, August 08, 2005

Trading Vs. Investing

With trading, you monitor stock quotes frequently. You do not build insights and cumulative knowledge about business. I have a passion for understanding economics and businesses. To me, it is a lot more fun to know that beer consumption is at the lowest in 20 years rather than knowing if a stock is breaking out of a base.

I do believe that for account sizes of under 1 Million dollars, you can do very well with a proven trading system, provided you are psychologically wired to be able to cut losses automatically and avoid many of the behavioral mistakes that affect 99% of the human population. When your account size goes above $5 Million, the after-tax returns between trading and investing favor the disciplined investor.


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