Investing Vs. Trading

Created by Niles Plante, Modified on Tue, 3 Sep at 2:58 PM by Niles Plante

Prospero's signals are separated into two types:

Long-Term - Predictions focused on time horizons of a couple of months up to 2 years.

Short-Term - Predictions focused on a time horizon of 1 day to 2 months.

While you can, and should use both regardless of your time horizon or investment style, our short-term signals often provide the most benefit to traders whereas our long-term signals most often benefit investors. So what's the difference between traders and investors?

Investors are more like settlers, building wealth for the long haul (years or decades). They focus on the underlying value of an asset and believe its price will grow over time. Imagine planting a seed: you need patience to see it grow into a strong tree. Just like a tree, it isn't enough to simply plant it. Trees need regular pruning and care to avoid disease. In the same way, long-term investors need to regularly rebalance their portfolios to ensure their money is invested in stocks with the highest gains. With Prospero, this is easily done by adding the stocks in your portfolio to your watchlist. This will allow you to check in every couple of weeks to ensure the signals still predict them to be strong performers. If there are better options, it might make sense to sell some or all of that stock and reinvest it into a stock with better prospects.

Traders are like prospectors, looking for quick profits by buying and selling within a short period, like a day, week, or, at most, a couple of months. They focus on price movements and trends, trying to capitalize on market swings. Think of it as catching a wave: you need to jump in and out at the right time to ride it successfully. Trading requires dedication and commitment, with traders frequently buying and selling stocks many times a day, and is both more complicated and riskier than investing. Short-term trading pits you against powerful and advanced hedge funds. While Prospero, with technology that refreshes much faster than a price target, can help level the playing field, you simply won’t beat a high-frequency trading algorithm. It is always important to remember what you are up against.

This table summarizes the key differences:

Feature	Trading (Short-Term)	Investing (Long-Term)
Goal	Short-term profits	Long-term growth
Timeframe	Days, weeks, months	Years, decades
Focus	Price movements, trends	Underlying value
Activity Level	High (frequent buying/selling)	Low (may hold for years)
Risk	Generally higher	Generally lower

Due to the risk profiles typical of short-term trading, we encourage those new to the stock market to start as long-term investors. This will help you build investment aptitude and confidence before taking on the risks associated with short-term trading. Also, as trading requires dedication to pull off, we recommend that users with only a few hours available to put toward observing the market, consuming the research, and making trades stick with a long-term investing strategy.

To see an expert using our signals in both long-term investing and short-term trading strategies, check our newsletters. These are delivered to your inbox a couple of times a week with detailed explanations of how to interpret the signals along with the forces currently moving the market. Prospero.ai's Investing Newsletter is delivered bi-weekly and is perfect for understanding how to use our signals in conjunction with other market data as part of a long-term investing strategy. Prosper.ai's Trading Newsletter is delivered several times a week and is perfect for seeing our signals combined with other market data to inform a short-term trading strategy.