In continuation of the previous article, when we talk about investing, we mean to hold the position of a stock for an extended amount of time. In this approach we may mean weekly and monthly data from stocks.
Now there is also the shorter run adoption of viewing the daily data as also described in the previous blog post. This is the difference between a trader and an investor, i.e. the notion that investors will hold the stock for longer amount of time as well as view the fundamental analysis of the stock rather than the technical analysis.
The reason for this distinction is that daily data are considered to be more random than weekly, or monthly data. On the other hand, we cannot ignore the fact that even daily data may have trends, so this is what traders try to do, i.e. follow the more volatile daily data. For very volatile stocks, because of the greater movement they do in daily prices, a lot of money may be made - or lost - in a short amount of time, i.e. days. This is the logic behind daily data compared with weekly and monthly data.
The investors who deal with the longer run of the stock, may argue that traders may be seen as... "taking blind leaps of faith" when seeing daily data, or that they are dealing with a... "black box" i.e. something that may not be showing its internal characteristics.In other words, the stock may depict random behavior when seen by its daily data.
Additionally, when dealing with daily data, traders believe that protective stops are useful as well, something that longer term investors may not be using due to the different nature of their investing. Thus, traders argue in return that with good protective stops placed at strategic intervals and prices, trading becomes a safe means of making money.
Now there is also the shorter run adoption of viewing the daily data as also described in the previous blog post. This is the difference between a trader and an investor, i.e. the notion that investors will hold the stock for longer amount of time as well as view the fundamental analysis of the stock rather than the technical analysis.
The reason for this distinction is that daily data are considered to be more random than weekly, or monthly data. On the other hand, we cannot ignore the fact that even daily data may have trends, so this is what traders try to do, i.e. follow the more volatile daily data. For very volatile stocks, because of the greater movement they do in daily prices, a lot of money may be made - or lost - in a short amount of time, i.e. days. This is the logic behind daily data compared with weekly and monthly data.
The investors who deal with the longer run of the stock, may argue that traders may be seen as... "taking blind leaps of faith" when seeing daily data, or that they are dealing with a... "black box" i.e. something that may not be showing its internal characteristics.In other words, the stock may depict random behavior when seen by its daily data.
Additionally, when dealing with daily data, traders believe that protective stops are useful as well, something that longer term investors may not be using due to the different nature of their investing. Thus, traders argue in return that with good protective stops placed at strategic intervals and prices, trading becomes a safe means of making money.
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