The principle of success in trading is very simple. Find a working strategy, apply it and make money. Everything seems very simple, but for what reason then many can’t do it? The lack of discipline? Passion? It may well be. Now we look at the most popular styles and timeframes, and define their pros and cons.
- Intraday trading.
Benefits. One of the most popular types. You should not hold the position all the time. Growth or fall for you are not very important in global terms, as you can make on any price fluctuations. Both on the growth and sales. Any strong movement within a day can be catched, and then you can make good money, the use of leverage or opening positions on the entire bill even with small market fluctuations may result in significant profit.
Disadvantages. You can lose as well as win. Great leverage can eat all of your capital. A very strong psychological stress. The desire to constantly open and close positions, to be constantly in the market. The main problem with most of these traders is “overtrading”. The second problem are stop-losses. Some traders put short stop-losses, receiving regular losses, and little profit from time to time. Others do not put a stop-loss, and sometimes they are lucky, but sometimes the market is very strong against them, and the trader loses a lot. During intraday trading most of the tools are very volatile, which may lead to frequent “knocking out” by stop-loss, then this in turn can lead to tilt. Tilt is a condition, when a person cannot control his actions. Because it is fraught with very large losses. Most of the large traders do not trade intraday. While the robots are used to. Absolutely not suitable for melancholiacs, as very often you need to quickly make a decision on entering and leaving.
- The medium-term trading (a few days, a few weeks)
Benefits. There is a possibility in more detail without hurry to analyze the market, and there is more time to open a position. Most of the existing patterns work better exactly on long formations – daily, weekly. Most major players and funds enter exactly within this timeframe. You will have no such pressure as in intraday trading, and no need for constant staring at the terminal. More free time and more time to prepare.
Disadvantages. Sometimes you have to wait weeks or months for entry. If you have a limited set of tools, then please be patient. The yield from such trades is significantly lower than the intraday, as the trading on daily timeframes involves long stop-losses and long goals, that significantly narrows the use of leverage, or it may lead to very significant losses. Absolutely not suitable for choleric persons. More for phlegmatic melancholiac persons.
- Long-term trade – investment (from a few months to …)
Benefits. Bought it and forgot about this type. Many people like this type, because after the purchase date you don’t need to look, analyze or study. Every six months – a year just read the statements and make a decision. It does not require any special programs. It is enough to understand the standards of financial statements and the desire to understand all this. The minimum psychological load. With adequate anticipation and understanding of current economic processes, there is no pressure at all. A very convenient way of putting money aside for the future with an eye of 10-20 years. Much better than any other alternative.
Disadvantages. Everything is very much dependent on the current economic situation and the investment instruments. There are years or even decades, when the market falls, and does not grow. There are times when the companies permanently lose the lead during that time, and shares of these companies will never return to the price at which you bought them. Sometimes they even go bankrupt. It is a myth that investing is the safest way to. In a period of rapid economic development, since the 90s, there was no long stagnation in the economy. But it can happen. In Japan, even now many shares cannot return to the levels that had been in 1990. Although it’s already more than 25 years. Unlike intraday and the medium-term trading – the result may come not when you want to. Just imagine – you’ve saved for your retirement and, at the moment when you decide to take your money – your assets may be at the minimum level. And you may have to wait. Sometimes years and sometimes decades. It is also very weak feedback. If the day trader can make hundreds of trades a week – after a year he will get good experience. When you will need 5-10 years, before you see real results from your investments.