I was wondering if anyone here is succesfully trading longer time frames. I have noticed that traders usually trade shorter and shorter time frames as they become more experienced and very often become daytraders. The main excuse is "eliminating overnight risk" but I wonder how much of it is actually just a need for action/excitement. Also, I have noticed that most of the great traders hold position much longer than most traders here: Dennis, Darvas, Livermore, Soros etc..At least for trend followers. In fact trends seem much easier to analyze on a weekly chart than a daily or an intraday.
Maybe I should be more specific. By "longer time frame", I mean holding at least a couple of months, trading with the weekly chart for example. Trends seem to be much easier to trade on the weekly, using MAs crossovers for example. Pull a weekly chart of AAPL for example and you'll see what I mean. My daughter could find the trend there. Anyone here doing this? Either the equity or Leaps for leverage. Most traders would get bored, but I don't mind being bored and rich.
The following article by Dr. Brett Steenbarger asks a very similar question: http://traderfeed.blogspot.com/2006/11/is-money-rationale-or-motivation-for.html The last line sums it up rather nicely -- "A rich and fulfilling life outside of trading might just be the best trading strategy of all."
Great article, thank you. If you look at Schwager's wizards books, you will notice that daytraders are very rare, and some of the traders he interviewed hold trades for years sometimes. But amazingly, if you read messages on this board, you will notice that at least 80% are daytraders. Absolutely no answer so far on this thread from traders who trade weekly charts.
Well, i am going to repeat what I said on a few other threads, which is the best methodology, and time frame is a key component of it, is the one adapted to your personality. If you are impatient, trend following is not really for you, and vice versa. So there is no clear cut answer, only the one for you. You need to define who you are and trade accordingly. The problem of "long-term" is that you will see your P&L moving up and down before realizing the gains/losses. With shorter-term strategies, there is more cash-flow coming in if your expectancy is positive. It took me 4 years to reach the point of my time-frame, which is 2-5 days. For my "urge' to daytrade, I use a small account. But I am not very good at it. Too much is lost in commissions and slippage. But again, it is because of my personality, my psychology. Not a rule by any means. Look inside yourself.
I agree with some of your points. But I don't think that necessarily trend following means being more patient. Some of the daytraders I know consider themselves "trend followers", they follow the trend on the 1 min chart. Yes, holding for a longer period will mean seeing your portfolio fluctuates more, but everything is relative. Your account fluctuates as well during the course of a single day. Some basic money mangement rules and position sizing should allow you to negate the stress of seeing your portfolio fluctuate. I was just wondering if , beyond personal preferences, longer time frames are not easier to trade. Just because of the simple fact that trends are easier to see because of less noise. Even if you are not a trend follower, and play support/resistance for example, being able to track the trend is an advantage. From personal (and other traders) experience, my largest profits have been from trading Leaps, with the best expectancy. It just seems to be very common. I have been trading 2-5 days (options only) as well and I am ready to switch to longer time frames usiing the same indicators. I know this is not usual, so I was wondering if someone on this board has been through this.
There's nothing wrong with using a weekly chart but "holding at least a couple of months" indicates that you are trying to tell the market what to do rather than letting the market tell you what it is doing. The market -- not you, not I, not anybody else -- will decide where it is going and when it is getting there. If you have a decent trading strategy, it will tell when to get in and when to get out, so your trades may be short as one week or as long as 6 months. I'm very suspect of traders who claim success using a "time strategy"; they're taking either unnecessary losses or smaller profits than they should. The keys to success are to cut your losses short and let your profits run. Good trading.
Sorry if I was not clear, I did not mean to say that i would keep the trade open for a couple months. What I mean is that my sytem would allow me to do it if I need to. I totally agree with you on the fact that you should never predict where the market is going and just listen to it and react. Now, like I said about trend following, it is not because your time frame is longer that you are going to let your losses run. Again, I know daytraders who are trying to predict where the stock price will be in 10 minutes, not different than trying to guess where it will be in 2 months. And as bad if you ask me. I remember reading somewhere that 99% of "investors" with a minimum of $1M net worth are not active traders. They hold positions for months. Why do you think that is? I know it is something troubling to ask on a board populated with active traders, but if most short-term traders are not succesful, isn't it something that we should look into? Where are the millionaires daytraders? Is there a reason for this? Commissions/Spillage? Emotions?
scalper, swingers, L/T holders, moon watchers... The time frame or style is not important, there are successful traders in every time frame and style of trading. Usually about 5-10 traders out of a hundred. The question is: Which one will you be? The 5% or the 90%+ that gives their money to the 5%?