Stock Trading Calculator

What is Stock Trading?

Stock trading is when someone, a stock trader, buys and sells stocks to make money. The goal of stock trading, similar to investing, is typically to buy stocks at a lower price and sell them later for a higher price.

For example, if a stock trader buys a stock for $100 and sells it for $110, then the trader made a $10 or 10% profit.

The goal of stock trading is to beat the market, that is, to perform better than a benchmark such as the S&P 500. Traders take advantage of short-term market swings and price fluctuations in an attempt to outperform the overall stock market.

Stock trading or investing?

Stock trading is similar to investing. Both traders and investors buy and sell stocks to make money. However, the difference is that stock traders hold their positions for the short-term, whereas, investors hold for the long-term.

If a stock trader is not consistently outperforming the overall stock market, it is better to invest instead of trade stocks. Because the goal of stock trading is to outperform the long-term investors by being a profitable short-term trader.

Trading stocks is more risky than investing, because, in the short-term, there is more price fluctuation or volatility (i.e., risk). Over the long-term, the price fluctuations are less volatile, and therefore the risk is lower. Volatility is risk.

With higher volatility, or risk, the potential profit is higher. Stock traders take advantage of the short-term volatility in an attempt to outperform the stock market and long-term investors.