Short Term vs Long Term Trading

Hi All

First off, I'm a newbie just starting out in trading.

I read on this forum that the first place to start is to look for longer term trends and trade those before moving to day trading. That is what I am currently doing.

That confuses me a little. It seems to me that trading longer term trends is something you can do with an hour or 2 a day and then forget about it whilst the trend plays out or you get stopped out.

Day trading on the other hand requires you to sit in front of a screen all day.

So - if day trading is harder & requires more time & if trading longer-term trends is profitable, then why bother with day trading ?

Now - please be gentle with me !

Cheers

Pedro

Very simple.

If you risk 2% of your account per trade for an average return of 2% (after losses) then think about how often you can do this.

As a day trader I can take the return 6 times per day. As an eod commodity trader I'd be lucky to do it 6 times per year per contract (say 10 good liquid ones).

So 6*250*2% vs 6*10*2%

But a day trader is "working" for his points. And a day trader is exposed to issues because the decision timeframe is so short as well as higher trading costs.

Pedro,

Welcome!

Daytrading programs generally require only minimal capital to start (some 10k or lower) and scale only up to 10-50m account sizes, whereas long-term trading starts getting really efficient at 10m and scales up to the billions. They are really two very different solutions to two very different problems!

jj

Hi Pedro,

IMO, In one word "FREQUENCY" !!!

Once you have a system which offers a positive expectancy, then to increase profits you need to increase the number of trades and I would say that there is a higher probability of this being achieved Intra-Day. But then again I guess it depends on the strategy being employed.

Plus, there are other forms of trading other than Trend-Following such as Mean Reversion, etc but I'm sure some would argue that in all forms of trading we are essentially trading trends!!!!

I am one that would argue that MOST are "attempting" to trade a trend.

I don't know too many who will take a long when they are expecting that the market is going to take a dive. That would be like. Hey we are fixing to take a big dive in the markets so I better put on a bunch of long positions before it is too late

Pedro,

All styles can be profitable, but not for everyone, Find a style that suits you best, be it, long term,position,daytrading,scalping. It doesn't matter, there is more than one way to skin a cat.

It's important that you look at what you can put in, then look at what you can take out.

Obviously, if you do not wish to sit in a chair all day then maybe scalping or daytrading is for you as you can switch off and go out or whatever it is you wish to do.

I would disagree with this.
WHile using the figures supplied above, then what you say is correct.

However - with long term trading,one would hope for far more than a 2% gain.

You could hope to be in a trade for many montsh on end resulting in potentially far greater percentage gains.

SO while the frequency of trades is less, the hope is the returns will be far greater.
ANd that is the trade off.

In my system - you can't say one system is better than teh other they are different systems.

Ok how about this scenario:
I trade the GBP/CHF with a 7 pip spread on a 1.00 lot...
I make 5 trades a day and win all 5 of them... 25 pips for the day right.. well factor in the 35 pips you had to climb out of the hole to make your 25 pips. You banked $250 but had to climb out of a 35 pip disadvantage (7 pips on each trade)

Ok so you made $250 bucks each day (25 pips) and you do that for 5 days- $1250 on the week

Now the other side of the coin. I see a long term bull move coming by reading the charts the correct way. I mark my entry and get in. I am also now down 7 pips to start (-$70) but the upcoming trend is going to be good for at least 125 pips to the first pullback.

A long term trader makes the 125 pips without the daily grind of up and down, the banging of skull on 1 minute charts- and it only cost him/her the 7 pips to make the same amount. No- 7 pip "hole" to dig out of- dig out once- and you are just fine.

Just both sides of the coin for ya!