Becoming a Trader or Investor?

Investing in the capital market, especially stocks, is increasingly popular among millennials and Gen Z in various cities, including the capital city and other urban areas. Online stock trading makes it easier for investors to trade from anywhere. Many millennial investors then become active investors, or what is commonly known as “traders.”

Traders are investors who actively engage in buying and selling stocks. They are different from investors who are typically associated with long-term investments. Traders are often known as speculators because they seek short-term profits from the difference in buying and selling prices within days or even hours. By understanding these two types of market players, novice investors can adjust their needs, whether to become traders for short-term needs or true investors for long-term goals.

Based on investment principles, a trader has the buy and sell principle. Traders buy and sell by analyzing stock price movements to gain profit. Meanwhile, investors with the buy and hold principle will buy stocks and then hold them for the long term. These investors will sell their stock portfolios when they have achieved their financial goals.

Fundamental vs Technical Analysis

In evaluating investment products, an investor can use two analysis methods: fundamental analysis and technical analysis.

1. Fundamental Analysis
• Definition: Fundamental analysis is used to analyze factors that affect stock prices, such as the business conditions of the related company as well as national and international economic conditions.
• Approaches: There are two approaches, namely top-down analysis and bottom-up analysis.
• Top-Down Analysis: Investors analyze national and international economic conditions first, then the industry conditions of the company, and finally the financial condition of the company itself. For example, if an investor wants to invest in food sector stocks, they must first look at Indonesia's economic conditions, then the business conditions of the Fast Moving Consumer Goods (FMCG) sector, and finally the financial condition of the company whose stock they want to analyze.
• Bottom-Up Analysis: This approach starts by evaluating the company's condition first, then the FMCG industry conditions, and finally the national and international economic conditions.
• Indicators: Some indicators used to evaluate a company's stock fundamentals include Return on Investment (ROI), Return on Equity (ROE), Price to Earnings Ratio (PER), Debt to Equity Ratio (DER), business news, and macroeconomic indicators such as inflation, GDP, and interest rates.
• Data Sources: Data for fundamental analysis can be found in financial statements, company annual reports, and economic news.
2. Technical Analysis
• Definition: Technical analysis is a method of analyzing stock price history to predict the future price of the investment instrument.
• Assumption: This method is based on the assumption that stock price movements will form certain patterns that will reoccur in the future.
• Tools: Technical analysis generally uses charts to depict the movement between supply and demand for stocks shown in points. Traders or active investors usually use candlestick charts for technical analysis.
• Indicators: Commonly used technical indicators include moving averages, Fibonacci retracement, Bollinger Bands, and others.
• Data Sources: Data for technical analysis is usually included in trading applications in the form of real-time price charts and order book data.

Trading applications provided by securities companies for their investors typically have special features that display fundamental data of related assets and economic news. However, if the application does not have these features, investors can visit economic news applications such as Yahoo Finance, Bloomberg, or Marketwatch to monitor the latest stock price movements and stay updated with related news.

Conclusion

Choosing between becoming a trader or an investor depends on each individual's financial goals and risk profile. Trading is suitable for those seeking short-term profits and possessing good technical analysis skills. Meanwhile, being an investor is more suitable for those with long-term financial goals who focus on the fundamental analysis of companies. Both approaches have their own advantages and challenges, making it important for each individual to understand and adjust their investment strategy according to their needs and financial goals.