Merriam Webster dictionary defines the term invest as
Definition of invest · 1: to commit (money) in order to earn a financial return¹
Simple, right?... not so fast.
Once you enter the realm of investing you soon learn that this is not a blanket statement and that there are many different facets to it. One of the most common questions I receive is, "What's the difference between investing and trading? I thought they were the same." In actuality, they are quite different in the financial world although the jargon is used interchangeably by the novice.
Investing is a long-term approach to the markets and often applies to stock buying and holding.
Trading involves a short-term strategy to maximize profitable returns. When trading forex, you are always trading a currency pair – selling one currency while simultaneously buying another. As this happens traders put in a bid in which direction they expect the price to go up(buy) down(sell). Therefore forex allows you the opportunity to take profits in both a bullish(uptrending) market or a bearish(downtrending) market.
In the foreign exchange, better known as forex, trading can be done in timeframes as low as one minute and as high as monthly.
Deciding whether to invest in the foreign exchange markets (forex) or stocks/indices depends on a trader's or investor's risk tolerance and trading style.
Things to consider are volatility, leverage, and market trading hours.
Equities markets— stocks and index funds— are better for a buy-and-hold investor, while active traders often prefer the faster moving forex markets.
Trading offers the opportunity to actively participate in the market, far more frequently than you would invest.
What's your trading style?
How to decide the best timeframe to trade forex is entirely different per individual and depends on your risk tolerance, account balance, and trading strategy.
The trading strategy I teach to my students on the precious metal Gold (XAUUSD) is a scalp trade and is a profitable ritual that can be adapted to each trader's personality.
As students advance in mastering the simple strategy I also offer the client plan to become a Day/Swing Trader for the most profitable currency pairs. Within 5 sessions you will be using a hybrid of fundamental and technical analysis on a daily and 4-hour timeframe with an entry on a 1HR chart.
In conclusion, I believe its best to diversify your portfolio and buy and hold stock and cryptocurrency like bitcoin and also to trade in forex for quicker returns. Remember that there is high risk involved in both, so never invest money you are not willing to lose.
I hope this information was helpful. Until next time... PEACE
¹“Invest.” Merriam-Webster.com Dictionary, Merriam-Webster, https://www.merriam-webster.com/dictionary/invest. Accessed 19 Jan. 2021.
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