Long-term or short-term trading: what to prefer?
Category : Strategy
For quite a long time, trading has been transformed several hundred times. The approaches to the market analysis, fundamental factors, trends, and market phases have changed, along with the market players themselves. It was thanks to the latter that the financial markets have developed and attracted both investors and managers.
Certainly, every person has his own vision of the market. Some people trade according to the trend (https://www.merriam-webster.com/dictionary/trend): they buy when the bull market is there and sell when it is replaced by the bear market. On the contrary, others work in the counter trend. This, in turn, has spawned many more techniques, one of which is short-term and long-term fix api trading.
It is not so difficult to guess that the short-term trading is based on a short time period of trading position retention, while the long-term trading is based on a long time period.
In the financial market, in particular fix api forex, there is a misconception that only small traders are engaged in speculation, while the deals with long-term prognosis are made only by real titans in this field. However, that is not true! These types of trading depend mainly on the approach taken to analyze and forecast the financial asset, rather than on the size of your purse.
Consider the features of each type to understand what kind of trading is just for you.
Features of short-term trading (speculative trading):
- A large number of trading positions. Some brokerage companies encourage active trading, because it brings commission to the fix api brokerfor each transaction. The regular operations bring a regular cash flowto the broker. Moreover, some brokers establish conditions for mandatory selling volumeto withdrawfunds. Speculative trading resolves this problem, too.
- Low risk and profitability parameters. As a rule, such operations are performed in a limited timeframe and, therefore, entry and exit position points are adjusted based on the smaller ratio levels. This allows you to limit the risks. After all, if you take into account the fact that there are a large number of transactions, then the transaction risk should not exceed 0,5%, or even better, it has to be in the range between 0,1% and 0,25%. This will immediately eliminate the incorrect forecasts and provide a steady profit stream.
- Ability to catch short spreads. Most of the speculative positions are made on the basis of an algorithmic approach that can determine the optimal entry point based on the underlying parameters set in the trading robot. Let’s take for example a trading robot that trades according to the fix api arbitrage trading – forexzzz.com/en/product/forex-zzz-lock-arbitrage/. It makes hundreds of transactions with short levels of profit-taking, based on the exchange rate difference of the same asset in the forex market. More details about the arbitration algorithm can be read on the following link.
Long-Term Investment Features:
- The forecasted model enables determining the most attractive investment assets in the long term on the basis of both fundamental and technical factors. This allows you to make a one-time transaction (usually several transactions per month) and to retain the positions based on the market movement.
- High risk and profitability parameters. Since the analysis is conducted on a daily interval for a period of more than a year, the exit point will be much different from the current asset value in a percentage ratio. In turn, this will provide a wide range of Stop loss and Take Profit levels. The normative risk parameter in the transaction for such operations is in the range of 2-3%.
- Ability to catch long-term spreads; this kind of trading is based more on manual trading and on trading strategies of the fix api traders. This can be both general rules and principles of transaction analysis, and banal technical elements in the form of indicators (Moving Average, Bollinger Bands, Stochastic, AO, etc.).
To summarize, I want to note that the best option is a combination of these two types. Personally, that’s exactly what I do. I have a trading robot that is based on a scalping strategy, and I make all global investments based on my mathematical predicting model, technical strategy and the market position as a whole.