August 26, 2009
Dissecting the Benefits of Long Term Trading
Short term trading was the topic I wrote about a few days ago and it would be quite unfair not to talk about its rival: long term trading.
I have mentioned that forex mentor and Trading Mastermind founder Scott Shubert is an advocate of long term trading. He said that “trading longer term is easier,” while “day trading is more difficult to win.”
Long-term trading has the potential to be more profitable and provide more risk control, and is more easily learned and executed by new investors. “In general, it is preferable and more desirable to enter trades and stay on those trades on a longer time frame,” said Mr. Shubert.
What makes long term trading much easier compared to short term trading? First of all, trading on the longer time frames enables you to do a more thorough analysis in a relaxed state of mind before making trading decisions. Trading on a shorter time frame means that a trader needs to act quickly because there is not enough time to make a thorough analysis.
“On the longer term time frames, you can take your time and look at everything you need to do and relax before you make a trading decision. Therefore it’s much more likely that you will make wise and profitable trading decisions,” Scott said.
He also added that position trading or longer term time frame trading, or swing trading offers less stress and a more enjoyable lifestyle. Plus, trading on a longer time frame requires less capital and less capital exposure than day trading.
Even though Scott believes that long term trading is more advantageous than short term trading, he assures everyone that they will definitely learn how to trade on all time frames in his upcoming course. Again, the key is to balance trading on all time frames, long and short.
P.S. By the way, Scott posted a new entry on his blog Forex Trading Insights. You might want to check out what he says about choosing which currency pairs to trade.
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Comments on Dissecting the Benefits of Long Term Trading »
True, as far as lifestyle and reliability.
False, for the capital needed.
I can successfully day trade a $250 micro account, maintaining a 1% risk. But I need an account many times larger to long term trade, because the trading ranges are so much larger.
I could day trade the larger account and potentialy make the same gains as the longer term trade, (potentialy, because I am an inconsistant day trader. I can do it occasionaly, but I dont like staring at the charts regularly, or for long periods of time). Still, if I risk the same amount on both trades, and have the same odds, I will have the same gains, regardless of the time frame. However, capital exposure will be less on the longer term trade. Because of the higher risk in pips, a smaller position is needed. This does not however, change the risk or the gains, which are identical on both trades.