Short Term vs Long Term Trading

[pedro01]

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 ! :smart:

Cheers

Pedro

 

[nine]

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.

 

[Mathemagician]

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

 

[Chorlton]

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 ! :smart:

Cheers

Pedro

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!!!!

 

[StratOpt]

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

 

[Lee Shepherd]

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.

 

[qwertyuiop1]

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.

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.

 

[VSA_Student]

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!

 

[rnicoll]

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

My personal theory is that day trading is like long term trading, but for the ADHD generation :-D

Seriously though... different styles suit different people. Long term is good for people are patient, and make better decisions when not under pressure. Short term is good for people who don't want to be in the market for long at a time, and can deal with trading under pressure. Short term trading is less influenced by fundamentals, and is more suitable to technical analysis.

Personally I like short term trading because:

* I get my profit/loss quickly, and I like closure.
* I'm not exposed to the market for long at any point in time.
* The pressure kinda gives me a kick (desk-adrenaline junky here)

However long term trading is generally safer and easier to pick up, hence recommended for beginners.

 

[graemenash]

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!

Thing is, if you're aiming for 5 pips on a day-trade and 125 pips on a swing trade, you're presumably using smaller stops while day-trading at therefore larger position sizes, so 125 pips isn't necessarily five times what the daytrader would make in monetary terms?

 

[wildkactus]

as I see it, it's down to the individual,
I myself like the longer time frames as the 1-2 hours a day is just right for me, also I look at trading as just one avenue to make money, and use other avenues (Business and property) to keep my money growing as well.
The don't keep all your eggs in the one basket thing.

 

[nine]

Agreed graemenash,

VSA_student, if you are that bad at day trading compared with eod then you should get a job.

 

[fayalac]

Hi Pedro.
Indeed the first step to get to day trading is to trade on longer therms, then with some expertise you can move to shorther time frames, but dont get confused.
To work on a determined time frame depends not on what you think you can make, it depends on you, you must feel confortable with your trading strategy, if you have the time to spend in front of your screen, then you can daytrade, otherwise get rid of the idea, now you may feel good with the results youre havind trading longer therms, you decide which is your better way to trade, day tading can be as profitable as longer therms trading if you feel good and your temper fits.

 

[fayalac]

nine, i think you shouldnt be that hard, pedro is trying to start something you maybe started long ago, anyway i think youre rigth!!.

 

[ofurbaldur]

Position trading is a very nice start.

Just keep in mind that the shorter the timeframe the more cost you are going to have because you are likely to need alot of services to support your trading as well as transaction cost increases.

Regards

Baldur

 

[luckyd1976]

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.

Exactly, Shouldnt this be a Sticky? How many of these threads do we get?

Pedro,
Every style has its own unique Pros/Cons.

My Favorites...
1- Iron Condors (Monthly Income)
2- Modified Collars (Income + Appreciation)
3- Daytrading/TrendTrading (Breakouts)
4- LongTerms (65ema/260sma)/(FrontRunners)

Each one of them has a different Risk/Reward. The challenge is to run, blend, or make a system that allows you to sleep well at night...

 

[luckyd1976]

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

MOST is right there. Only groups I can think of that would, LongTerm DCA(ers) with big pockets!

 

[ofurbaldur]

If you are starting out better start with a longer term view. So eod position trading.
Much easier to make money than intra day-trading

Regards

Baldur