What is the perfect time frame for short term trading

[drbeta]

Hi everyone, my name is Dave and I am a recent graduate and a beginners level trader. I have a question about time frames.

My friend and I are trying to set up the perfect time frames and are doubting between these;

time frame 1 week
time frame 1 month
time frame 3 months

For long term investing we now know it all comes down to the fundamentals, lets say 'Warren Buffet Style' investing, but we are also interested in short term trading.

Our trading plan now is to;

1. Understand the global economy and how one effects another.
2. Analyze and understand the markets/industries we are buying stocks.
3. Analyze the current market trends and the news.
4. Search for the best stocks.
5. Analyze lots and lots of charts for these stocks from years back to now and understand the trends and patterns of these stocks.
6. Make predictions for each stocks performance and trends and patterns for the next week, month or 3 months.

Now we were discussing that if we do this and we do understand the global economy, the market trends and the news events, we will ever be able to perfectly predict the stocks chart for the next month or 3 months. Are we thinking right here..?

Our goal is to perfectly predict the charts of our stocks for the coming month or 3 months.

Therefore our guess is that maybe a months time frame or 3 months is the best, because in a week there is much volatility, but maybe in the future we can be able to predict our stock charts perfectly for the next month or 3 months. Is this a realistic goal?

All opinions are welcome offcourse! Thank you very much

 

[counter_violent]

Hi everyone, my name is Dave and I am a recent graduate and a beginners level trader. I have a question about time frames.

My friend and I are trying to set up the perfect time frames and are doubting between these;

time frame 1 week
time frame 1 month
time frame 3 months

For long term investing we now know it all comes down to the fundamentals, lets say 'Warren Buffet Style' investing, but we are also interested in short term trading.

Our trading plan now is to;

1. Understand the global economy and how one effects another.
2. Analyze and understand the markets/industries we are buying stocks.
3. Analyze the current market trends and the news.
4. Search for the best stocks.
5. Analyze lots and lots of charts for these stocks from years back to now and understand the trends and patterns of these stocks.
6. Make predictions for each stocks performance and trends and patterns for the next week, month or 3 months.

Now we were discussing that if we do this and we do understand the global economy, the market trends and the news events, we will ever be able to perfectly predict the stocks chart for the next month or 3 months. Are we thinking right here..?

Our goal is to perfectly predict the charts of our stocks for the coming month or 3 months.

Therefore our guess is that maybe a months time frame or 3 months is the best, because in a week there is much volatility, but maybe in the future we can be able to predict our stock charts perfectly for the next month or 3 months. Is this a realistic goal?

All opinions are welcome offcourse! Thank you very much

I think you need to treat the two areas independently.

1) Investing for the longer term. Drip feed funds into the markets, pensions style, and make adjustments where required to the portfolio.

2) Where you can be more involved in the day to day activity. Small positions especially where leverage is used, where if profits from trade activity reach certain goals, you can then take funds out and re-invest, top up the longer term portfolio.

You need to be decently capitalised on the trading side. You need to keep position size small. You need to fully understand the effects of leverage.

 

[malaguti]

Our goal is to perfectly predict the charts of our stocks for the coming month or 3 months.

Try being able to predict correctly just 50% of the time for starters.
Know when your prediction is wrong is possibly more important so that when you are wrong you don't take everything down at the same time
Have a strategy as CV says above for knowing when to start drip feeding,
also when to increase your buying in a particular stock/sector
know when to start selling some of your investment and then know when to get out completely even if you got the initial direction correct

Investing is just like any other form of trading, its no easier or harder than short term, its all about timing. and absolutely nothing is perfectly predictable

 

[drbeta]

Thanks for your replies counter_violent and malaguti! Very nice. Ok yes counter_violent, nice to hear, because we were thinking in the same way . Ok, maybe we should then really understand leverage first before we start with it.

And ok, maybe we should aim for the 50% first . Yes about timing we also have lots of questions.. But for now we are really questioning when we want to buy and when we want to sell..

After our last discussion we think its more easy to predict the stock charts/trends for the coming week. For example if there is an event planned next week, we want to try to predict the outcome of the event and how it will effect the charts for the next week. Is this a good strategy?

We think a weeks time is maybe the best time length, because in one day you have to be very good and on top of the charts. We dont know if we have the time for it. In a months time lots of unexpected things can happen making it very hard to predict the chart? And in 3 months time? We cant think of anything where we can base our predictions on for the coming 3 months chart/trend?

In a weeks time we can follow the news and the upcoming events of next week and then predict the outcomes and predict the chart for the coming week, so that we know very good when to buy and when to sell.

What do you think of this strategy? Will it work? Or are we missing some pitfalls here?

 

[malaguti]

Thanks for your replies counter_violent and malaguti! Very nice. Ok yes counter_violent, nice to hear, because we were thinking in the same way . Ok, maybe we should then really understand leverage first before we start with it.

And ok, maybe we should aim for the 50% first . Yes about timing we also have lots of questions.. But for now we are really questioning when we want to buy and when we want to sell..

After our last discussion we think its more easy to predict the stock charts/trends for the coming week. For example if there is an event planned next week, we want to try to predict the outcome of the event and how it will effect the charts for the next week. Is this a good strategy?

We think a weeks time is maybe the best time length, because in one day you have to be very good and on top of the charts. We dont know if we have the time for it. In a months time lots of unexpected things can happen making it very hard to predict the chart? And in 3 months time? We cant think of anything where we can base our predictions on for the coming 3 months chart/trend?

In a weeks time we can follow the news and the upcoming events of next week and then predict the outcomes and predict the chart for the coming week, so that we know very good when to buy and when to sell.

What do you think of this strategy? Will it work? Or are we missing some pitfalls here?

this is just my experience: trying to correlate price with news is pretty much futile. If you can do it, good for you.

 

[drbeta]

Ah ok, that's bad news.. I hear different opinions about if it works or not. But yes, In most cases I hear its very hard to predict how the market (traders) will react to a news event.

But ok, if you cant use news event as a predicting driver for your stock chart? What other predicting drivers do you recommend? Do you base your predictions only on the chart itself? For example how the chart is fluctuating lets say last weeks, months or years (for example with indicators)? Or is there more that you can use to make your predictions?

 

[drbeta]

I mean for example today someone said he looked at the price compared to competitors. and then for this telecom company the price was at this point much lower than the price of the competitors and therefore he expected an uptrend in the chart soon. So in this case he predicted the chart will uptrend because of the comparison with competitors, making the comparison with competitors the driving cause, leading to the chart to uptrend soon.

So he correlates price with competitors prices then right? what else is price correlated with? Or where do you correlate price with? If I can ask Very curious for your answer. thanks!

 

[TraderLT]

Ok so going back to your original post - If your aiming to hold trades for 1-3 months, then you are going to have much more success if you are on the right side of the fundamentals.

So - from a very basic starting point, this is how I would look at it:

Start with a bias - do you think the market is going to go up or down over the next three months?

Look for clues in the data. If GDP is increasing, you can be pretty confident the market is increasing. Get on excel and plot the fundamental figures and overlay the market over those time periods and you can see if there is a correlation.

Then once you've got a market bias - pick your stocks. You want something liquid that will allow you to trade a position size suitable to your capital.
If you are bullish then you'll want something with a higher beta than the market - or you may as well just take a position on the market itself.

Then find your way of timing your trade entry/exit. There are enough books on the subject! If you are holding trades for 1-3 months then your entry price wont be as important as your position size.

Good luck!

 

[TraderLT]

"I mean for example today someone said he looked at the price compared to competitors. and then for this telecom company the price was at this point much lower than the price of the competitors and therefore he expected an uptrend in the chart soon."

Also I'm not sure that this is wise.

If a sector is on the rise, and one particular stock is not showing strength - it means that thousands of traders in the market don't want to buy it.

It's a bit arrogant to think that you know something, that many very clever and well paid people do not. You could be right - but it's a bold move.

 

[drbeta]

Thanks TraderLT. This really helps us out. I guess we will then practice looking for biases in the markets to see if it will go up or down over the next 1-3 months.

One more thing. Could you also apply this for the upcoming week? So look for a bias and then think about if the market is going to go up or down over the next week?

 

[TraderLT]

In my opinion - short term trading is much more about what the market is doing right now (price action - market volume and order flow) rather than fundamentals.

For example - If I wanted to day trade the e-S&P, I would be much more concerned with things like the hourly trend and the orders on a level 2 quote.

I don't believe that the market is more or less likely to up tomorrow because it has gone up today - although maybe this does happen when something is in a bubble. It is my opinion that if the price of an asset is going up, it is because people would rather hold it than deposit cash (or whatever risk free rate).

Problem with 'trading the news' on a short term basis is because it doesn't matter how the majority of traders react to a news item - when there is predictable high volume in the market (non farm payroll ect) - that is when a large institution or pension fund can find the liquidity to unload a big position on the market. News events = lots of liquidity (ie. lots of people wanting to buy and sell) and the big players need LOTS of buyers/sellers for changing their positions.

Deutsche Bank stock may well go up over the year, but if Fidelity want to sell $500million on Thursday when there is likely to be high volume, and you are long the stock on a short term basis because the hourly trend is up - you are going to get smashed.

I'm not a very good short term trader - I basically break even and keep myself busy whilst my longer term trades make the money! There are probably much more qualified people than me here to answer. I've got a lot of respect for good legitimate short term traders - but they are few and far between. It's also the realm of scammers and spread betting bucket shops - so be careful in your research there! Be critical of everything.

I'm not saying predicting the market on the short term isn't possible - plenty of people are making a living from it. You do need the right instruments though. You cant buy and sell shares in a retail brokerage account on the short term and make a profit. Even if you are VERY good - the spreads and fees will kill you. Also spread betting on the short term is a vile, toxic rip-off dressed up by advertising as the best way to trade. You need to be so conscious on what the actual cost of your trading is.
Lets say you are scalping for 10 points in Forex and the broker is taking 1.5 in the spread, you get a 1 point slip on the order - your costs are already 20% of your profit before you start.


Ok rant over! Hope that helps

 

[gerryg]

Ok so going back to your original post - If your aiming to hold trades for 1-3 months, then you are going to have much more success if you are on the right side of the fundamentals.

So - from a very basic starting point, this is how I would look at it:

Start with a bias - do you think the market is going to go up or down over the next three months?

Look for clues in the data. If GDP is increasing, you can be pretty confident the market is increasing. Get on excel and plot the fundamental figures and overlay the market over those time periods and you can see if there is a correlation.

Then once you've got a market bias - pick your stocks. You want something liquid that will allow you to trade a position size suitable to your capital.
If you are bullish then you'll want something with a higher beta than the market - or you may as well just take a position on the market itself.

Then find your way of timing your trade entry/exit. There are enough books on the subject! If you are holding trades for 1-3 months then your entry price wont be as important as your position size.

Good luck!

Thanks man. It is simple and quite obvious but it is work. The likelihood of wins is about 50% (not counting spreads). If you want to push odds in your favour then you need 99% of other stuff and most important - sponsor or good-salaried job

 

[drbeta]

In my opinion - short term trading is much more about what the market is doing right now (price action - market volume and order flow) rather than fundamentals.

For example - If I wanted to day trade the e-S&P, I would be much more concerned with things like the hourly trend and the orders on a level 2 quote.

I don't believe that the market is more or less likely to up tomorrow because it has gone up today - although maybe this does happen when something is in a bubble. It is my opinion that if the price of an asset is going up, it is because people would rather hold it than deposit cash (or whatever risk free rate).

Problem with 'trading the news' on a short term basis is because it doesn't matter how the majority of traders react to a news item - when there is predictable high volume in the market (non farm payroll ect) - that is when a large institution or pension fund can find the liquidity to unload a big position on the market. News events = lots of liquidity (ie. lots of people wanting to buy and sell) and the big players need LOTS of buyers/sellers for changing their positions.

Deutsche Bank stock may well go up over the year, but if Fidelity want to sell $500million on Thursday when there is likely to be high volume, and you are long the stock on a short term basis because the hourly trend is up - you are going to get smashed.

I'm not a very good short term trader - I basically break even and keep myself busy whilst my longer term trades make the money! There are probably much more qualified people than me here to answer. I've got a lot of respect for good legitimate short term traders - but they are few and far between. It's also the realm of scammers and spread betting bucket shops - so be careful in your research there! Be critical of everything.

I'm not saying predicting the market on the short term isn't possible - plenty of people are making a living from it. You do need the right instruments though. You cant buy and sell shares in a retail brokerage account on the short term and make a profit. Even if you are VERY good - the spreads and fees will kill you. Also spread betting on the short term is a vile, toxic rip-off dressed up by advertising as the best way to trade. You need to be so conscious on what the actual cost of your trading is.
Lets say you are scalping for 10 points in Forex and the broker is taking 1.5 in the spread, you get a 1 point slip on the order - your costs are already 20% of your profit before you start.


Ok rant over! Hope that helps

Definitely helps. Thanks. I guess I will start with the 1 - 3 months and see how that works out. And then try to go from there to 1 week or days. Because I guess you're right. very short term trading (day to week) seems hard to me. And also the costs and fee's concern me a little. You don't want any costs when its already hard to break even. So maybe I will just take it one step at the time and try to make the time frame shorter over time.. Thanks man!

 

[NVP]

I would suggest you revisit your strategy first the worry about timeframe

Trading is about deciding exactly what you are looking for in the market and then dropping all else in behind it

No variations or deviations as it dilutes,the strategy

N

 

[drbeta]

I would suggest you revisit your strategy first the worry about timeframe

Trading is about deciding exactly what you are looking for in the market and then dropping all else in behind it

No variations or deviations as it dilutes,the strategy

N

Ah ok thanks, we will think about this (the strategy and what we are actually looking for in the market)

Thanks for all the help!