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Trading Timeframes


Long Term

Long term traders will work from end of day data and look to hold trades for a few weeks up to many months. Usually trend trading.

Advantages

No need to watch the markets intraday.

Fewer transactions means lower commission costs.

Cost of equipment and data is minimal.

Disadvantages

Large equity swings on single positions with large stops.

Usually only 1 or 2 exceptional trades a year so patience is essential.

Bigger capitalization required to ride longer term swings.

Frequent losing months.

Short Term

Working from intraday data and looking to hold for a day up to a week. Usually swing trading.

Advantages

More opportunities for trades.

Less chance of losing months.

Less reliance on one or two trades a year to make money.

Disadvantages

Transaction costs will be higher.

Intraday data adds to costs.

Overnight risk becomes a factor.

Day Trading

Working from intraday data the day trader will attempt to take small profits from intraday swings. All positions will be exited at the market close.

Advantages

Many trading opportunities in a day.

Much lower chance of losing months.

No overnight risk.

Reduced margin requirements due to no overnight risk.

Disadvantages

Transaction costs will be high.

Psychologically more difficult due to frequency of trading.

Profits are limited by needing to exit at the end of the day.

Data costs are high as real time data is essential.

Tim Wreford runs Online Futures Trading, a website that provides information and resources for traders. Tim also provides a free day trading system, the results of which are updated daily on the site.


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Boston Globe (registration)

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