By Rob Colville on October 16, 2015 in
Have you ever developed a new trading skill, addressed a known weakness, or corrected a perceived problem, and then thought to yourself “Hmmm, that was easy?” I suspect that most traders have never, and I think the reason for that is this: Because we naturally assume that complex problems—like those that can occur intraday and outside of long-term trading—require complex solutions. But do they really?
What if the key to more consistent results and improved performance didn’t require intricate tactics, strategic overhauls, or any significant changes to your existing methodology, and required only that you begin to embrace long-term trading instead? A lot of traders are amazed by how problems commonly encountered intraday tend to fade away once they transition or truly commit to long-term trading, so if you’re curious—or even a little skeptical—well, here’s the proof, and some big problems for which long-term trading is a definitive solution!
Whenever things get hectic, be that in the markets or in life outside of them, something amazing can happen when you just take a step back and examine the bigger picture. Suddenly, the events of that day won’t seem so pronounced anymore, and to see this for yourself, compare a recent intraday chart of volatile, news-driven currencies like USD/CAD, GBP/USD, or even GBP/AUD with their daily, weekly, and/or monthly charts.
Did you observe that the spikes really flatten out on the longer-term charts? And moreover, did you see how the dominant trend(s) are more clearly defined? These more definitive chart patterns are much more common in long-term trading, and these charts, as well as countless others, will provide pure, graphical representation of how long-term trading can mitigate the volatile, short-term moves that often give traders so many headaches.
When put into practice, long-term trading is likely to result in slower, more deliberate price action and potentially fewer set-ups, but more positive tradeoffs would include:
More confidence & validation: Trade longer-standing support and resistance levels, more sustained, dominant trends, and historically significant patterns with added knowledge and a confluence of these factors potentially in your favor.
Decreased susceptibility to news: Wait for news and intraday volatility to subside, and once the emotional reaction from the market has ended, trade the more natural response, for a possible trend move that runs longer and with less interference.
Less competition from algos & computers: Algorithms and the infamous “black box” systems are designed to get in and get out, skimming swift profits away from the markets and unassuming traders. And while long-term trading won’t erase the impact of algorithms, there’s a larger concentration of investors and actual market participants trading for the longer term.
While there’s a difference between long-term trading and trading for the long term, the ideas are distinctly connected…and as well they should be. Long-term trading, obviously, involves trading longer-running set-ups on higher-time-frame charts, while trading for the long term is all about discipline and a lasting commitment to trading a proven strategy over time.
Notice how both are built on a foundation of more delayed gratification, though, and don’t require many snap decisions or short-term performance. That’s an important piece of perspective that deserves the attention of all traders, whether partial to intraday or long-term trading.
You see, when focused on long-term trading, there can be an added degree of patience that traders often don’t have time for when trading intraday. Only in long-term trading will set-ups take longer to materialize and trigger, and even to turn profitable or get stopped out. The expectations are different, too. Long-term traders usually assess performance only each week or each month, once there’s been enough time for a larger sampling of trades, and that can be the greatest blessing of all, for it keeps them from fixating on money day in and day out, which everyone knows can be a crippling problem for traders across any market and/or time frame.
There are a million ways to trade the markets, and no one “right” way for everyone. There is, however, a “right” way for each individual trader, a means for trading that feels more natural, more comfortable, and more sustainable for the long run. Have you found what that method is for you yet?
In the event that you’re still trying to learn to trade intraday, or struggling to keep pace in volatile, fast-moving markets, then maybe your own, unique solution is to simply make a switch to long-term trading instead. As we’ve shown here today, the merits are clear, and in addition to being less imposing on your time and lifestyle, long-term trading may be just what you need to trade better and more consistently, and free from whatever problems you tend to face when trading those tighter time frames.