How do you know that you are better suited to short-term trading than swing trading?
New traders will vex over this. Hell, even seasoned traders struggle to define or redefine their trading strategy. Herein lies the struggle. How do you know which trading style is best and if short-term trading is the direction you should head in?
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It’s common knowledge that trading is difficult, especially in crypto markets where volatility is part of the mystery and appeal. Knowing what time-frame option will be best for you, either short-term or long-term, is not always an either-or option because opportunities abound. That being said, knowing the stats and history of a particular asset is very important. For example, most believe that Bitcoin is a long-term asset. Accumulate it and hold it. People feel that way about gold too. But when it comes to altcoins or small-market stocks, the daily ups and downs make great opportunities for day-trading and short-term holds.
So, here are some things that you have to keep in mind to see if short-term trading is the right fit for your trading style.
Spotting the Pivots in Lower Time Frames
You are either good at spotting the market pivot points on shorter time frames – or you’re not. It’s okay if you’re not so don’t try and fool yourself because it would only hurt your bottom line. The truth is, spotting the turn in market movement goes hand in hand with experience and intuition.
In truth, I’d go out on a limb and say that a majority of traders not good at spotting turning points in a short time frame, but the really good traders are quicker to jump on opportunity.
What does this mean for the average trader? Well, if you’re more laid back and not aggressive on trades, then short-term trading might not be your thing. People who get good at spotting the market turn often have a better understanding of supply and demand and can better predict trends. If this sounds like you, then perhaps intra-day trading is suitable. You can leverage this ability and trade the shorter-term with a modicum of proficiency and success.
Just remember that long-term trading is also good to create depth and diversity in your trading portfolio.
Are you quick to make decisive decisions or do you like to wait for more data before making a move? While there are benefits and risks to both for a trader, sometimes the short-term opportunities need quick action.
If that’s not your style and you need more time or a boost of confidence to hit the order button, then you might be better suited for the long-term trends and hold.
Position players are like the horse at the gate. When the bell rings and the gates open, they run with all their might. That’s not a bad analogy. Sprinters often don’t have the stamina for a mile-long race. They use up their legs on a quarter mile.
In any event, if you’re trading over a shorter time frame, maybe two to four hours, then quick decisions are necessary.
Taking your time to accumulate more data is fine too. You are in control of your trades. You determine how aggressive you want to be. You have to live with the consequences. Yes, of course it’s great to be prepared, but sometimes, not all the time, there is an opportunity knocking and regrettably, you’ve chosen to tread too carefully.
Who determines that? You do. And it reflects in your successes and missed opportunities.
Regardless, there’s no point in wallowing over “the one that got away.”
Use your trading journal to see if there’s a pattern of behavior and adjust from there.
If you don’t like holding multiple positions overnight then you might be a short-term trader. Certainly, no one really knows what the market is going to do when the people on the other side of the globe is awake and trading. If you don’t trust your long-term charts and analysis, then those trades need to be filled in your waking hours.
To each their own. Some people do well with long positions. They recognize the risk involved and are not worried about an 8-hour outcome. If you don’t like the risk, then stick with the short-term trading.
Eventually, you may be a little more lenient with yourself as you become more confident in your trading skill. Don’t let other people determine your goals. You know your limits and where you’re comfortable. Trade accordingly and then push the boundaries of your comfort zone just enough to keep trading interesting. You can always retreat to a safer zone if it doesn’t work out.
Tach It Out
In case you didn’t know it, “tach it out” is a motorhead term for testing the limits. A cautious trader rarely goes full bore. In fact, if a trader is going to tach it out, we might say that they’re going through a rough spot and need to slow down. It’s usually a sign of frustration and anger; where emotional trading has taken over. That’s not good!
Herein lies a clue to the mindset of short-term trading. PATIENCE. You’ve either got it or you don’t. You might think long-term traders have more patience, but I really believe short-term traders are infinitely more patient because rather than setting their stop-loss levels and leaving, short-term traders are present and moving with the market.
They often close on their goals faster because they spot the market manipulations and can redirect their course of action. And yes, things can get heated or super exciting. Being present means you are also at risk of being emotionally invested.
With intra-day trading, be careful not to keep digging a hole if you find that you’re in a losing position. With the right tools and mindset, you have the mechanism in place to stop before “taching it out” means you’ve busted the engine – or your portfolio.
Some traders do best with a clean slate every day. One of the significant benefits of trading intra-day is that you begin the day from zero; each day is a new day.
Swing traders and long-term holders have “carry-overs” and that gives them a peak into the longer trends. Instead of looking at the 1-hour or 4-hour charts, they’re looking at the 1-day or 1-week charts to see what’s happening. With short-term traders, they might look at the historical charts for a reference, but they’re usually looking at the intra-day price fluctuation and making a determination as to the best time to jump or get out.
Again, there is no right or wrong approach here. It all depends on your preference and the style that makes you comfortable. If you prefer to start your day from ground zero, then intra-day trading will work for you.
So let’s summarize.
You might be a short-term trader if…
- you’re good at spotting market shifts.
- you take quick, decisive actions when opportunities arise.
- you don’t like having open trades on the overnight.
- you are comfortable pushing the boundaries of your comfort zone without risking your entire portfolio.
- you like a clean slate when you start your trading day.
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