An Investor is a person who puts his money where it can potentially generate a return. He does not usually get involved in the money making process. Investors include buyers of investment real estate and buyers of funds.

A Trader is a person who fights in the capital markets front line personally in order to generate equity. He is the one who personally chooses the investment instrument (e.g option trading), makes an opinion on it and executes a series of trades in order to make money out of it.

Too many people have mixed being a trader for being an investor. This has led to a lot of misunderstanding. The misunderstanding comes from the wide spread teaching that anyone can choose to break out of the "rat race" by choosing to be an investor rather than a worker. That person then turns to exploring option trading or forex or such instruments "as an investor" and completely finds that not everyone can excel in those areas.

While it is true that anyone can be an investor by putting your money in a well diversified portfolio, not everyone can be a successful trader. Active trading requires far more skill and finesse to master and to make consistent money for income replacement. This is especially true when a lot of the strategies that are available today are highly subjective.

However, only by being a trader will anyone be able to generate the legendary returns that they yearn so much. And being a trader is exactly the hardest to do unless you have a proven system to follow or someone to mentor you.

Therefore, before you take the plunge into the capital markets, make sure you know what you are really into. If you have decided to become a trader, make sure you keep your full time job while you look for a proven system to learn. A proven system is something like the Star Trading System which I have followed with great success for years.