จากการได้ศึกษา ระบบ close system ของพี่ต้าน ทำให้ผมเข้าใจตลาดมากขึ้น มันประโยชน์มากในการเปลี่ยนทัศนคติในการเป็นเทรดเดอร์ โดยเฉพาะเรื่องการมองภาพใหญ่ การมีแผนรับมิือทุกสถานการณ์ก่อนลงไปเล่นเกมส์
There is no formal definition – which doesn’t help – but generally I categorise them as follows:
Short-term – the aim is to be in and out of a trade within hours or days (to include day traders and scalpers)
Medium term – the aim is to be in a trade for a few days to a few weeks
Long term – to aim to be in a trade for weeks, months or even a year plus
These categories are the aim of the trade. It does not mean that we are restricted to staying in a trade which is going against us, or that we must exit a trade because our time is up. It purely applied to our intentions at the outset.
Once we start looking to be in trades for over a year I generally categorise it as investing – and into the realms of fundamental analysis – rather than technical trading. This is a completely different skillset and these people will probably be wanting to gain income (such as interest or dividends) in addition to capital growth.
In this article I will look at 5 reasons long term trading can work to your advantage.
Fewer opportunities required
One of the main advantages of long term trading is you aren’t required to find new opportunities every day. Finding good trades is the hardest aspect of trading because no-one knows how price will develop in the future.
There will always be losing trades – our success relies on our winners making more money than our losers lose. When trading long term we can stick with the winners – rather than cashing out and having to look for a new opportunity.
Every year there are a few good trends across the asset classes. Once we find them we need to stick with them as long as we can – and extract as much from the trend as we can.
And every year there are several so-called “once-in-a-lifetime” opportunities. These make up the bulk of our portfolio – but there will be a number of less successful or losing trades along the way. By hanging on and adding to our winners we can absorb many small losses (even if there are rather a lot of them).
While we ride the trend there will be pullbacks. It pays to take a more holistic approach to the overall big picture (and stay in the overriding trend) rather than try to be greedy (and attempt to buy all the dips and sell all the rallies). This is an inefficient approach especially during a good linear trend as the pullbacks will be small and shallow.
If you could trade five or six really good trends (moving very well over a few months) every year, would you still need to look for more opportunities? Of course, we have to find them. And this leads us on to the second advantage of long term trading – as we are spending less time trading we can, instead, spend more time planning.
More time to plan
It’s always easy to identify a good trend with hindsight. But we have to make our decisions at the right hand side of the chart.
By knowing you are looking to take a trade over weeks or months we can concentrate on analysing higher timeframes. At the Dynamic Trader we use:
Monthly, weekly and daily timeframes for analysis
Weekly or (more often) the daily timeframe for trade set-ups
Much of the noise (for example gaps and irregular candlesticks) is removed by looking at the daily timeframe (and above). If there is still an array of mishaps (such as large ranging bars with disproportionately long wicks) then we can disregard the chart as not suitable for our purpose – there are plenty more to choose from.
We also abide by the 3 second rule – if you can’t identify a good chart within 3 seconds of opening it then it should be discarded. Do not be concerned with scarcity – there are so many choices to trade it is difficult not to find a good one. Plus, if there really aren’t any trends in play then you need to be bold – and wait.
By removing the noise we can see more clearly where lines of support and/or resistance lie. This is the foundation of technical trading. There are a variety of commonly used levels, such as horizontal pivot points, to angled measures, such as a moving average. If price is below one of these levels then it is likely to act as resistance (possibly preventing price from moving higher). If price is above one of these levels it is likely to act as support (possibly preventing price from going lower).
Support and resistance is fundamental to chart and candlestick formations, too. These patterns are often described as a fight between the bulls (traders who want price to move higher) and the bears (traders who want price to move lower). These traders, en masse, will have a price below or above which they are prepared to let price fluctuate around, but beyond this, they are likely to accept defeat and remove themselves from the market.
By being able to clearly identify horizontal lines of support/resistance and any patterns we have more confidence that price will move in a more predictable way. This is nearly always easier on a larger timeframe. Technical trading for Dynamic Traders relies on probability – it is never a “sure thing” but there are certainly instances where future price action is a “pretty sure thing”.
Simple techniques
As touched upon, in the last section, technical trading doesn’t have to be complex.
The smaller the timeframe traders trade, the more they have to rely on intricate indicators. Because they cannot see the wood for the trees they have to use ever more complicated tools to help them identify what they can no longer see. They do not have the time to plan – which means they cannot differentiate between strong and weak support/resistance reversal zones. They are therefore obliged to get in and out quickly – without ever realising (until after the event) if price had the potential to move further in the trade direction.
When we take a step back, and give ourselves room to breathe, we can see the bigger picture. As when completing a jigsaw puzzle we have to take a logical approach. First we identify what we know (the ‘corner’ pieces) then we identify how to fit them together (with the ‘edges’) and, finally, we can build up the rest of the picture.
In trading we can take a similar puzzle-solving approach:
First, identify major areas of support/resistance (does a trend have room to develop?)
Second, look for chart/candlestick patterns (do they reinforce a trend continuation?)
Finally, look for a logical and high probability point of entry and manage the trade
At the Dynamic Trader we have a number of simple trading tools to help us with this approach – as we want to exclude those charts which do not offer us the very best opportunities and, at the same time, we want the optimum entry and trade management techniques. Our trading tools help minimise losing trades and maximise profits from winning trades – but it is still possible to obtain trading success by following the simple rules above.
The advantages of long term trading is that you do not have to time your entry and exit precisely. So you do not require complex indicators to help you with timing or trend identification. If you miss fifty or a hundred ticks in a big trend, does that hugely affect your bottom line?
Clearly, if someone is trading on lower timeframes, they do not have time to consider their choices. If a trader is trading a five-minute chart then there is very little time to decide if the next bar will be higher/lower and therefore worth trading. This has two clear disadvantages: first, if a decision is not made then no money is made and, second, there is no time to check if there’s a better opportunity elsewhere.
When buying any other large ticket purchase (such as a house, car or even a vacuum cleaner) we wouldn’t limit ourselves to only a few seconds to make up our minds.
Of course the fact that we can make a quick decision doesn’t mean to say we should. We should never confuse action with decisiveness. We need direction, too.
Anyone in a high pressure job usually experiences burn-out within a few years. With long term trading there is little to no stress involved.
The advantages of reducing stress means that your right and left brain can function together:
Left brain: analytical thought, logic, knowledge, rules
Right brain: big picture, understanding, pattern recognition, risk
In his book “Thinking Fast and Slow” Daniel Kahneman identified that thinking quickly was not to our advantage the majority of the time – it did not give us time to judge the situation to the best of our ability. Most of the time this is not a problem – for everyday tasks. But trading (for the majority of people) is a unique task which requires, at least for the first few years, slower and more considered thinking.
Kahnmann categorised his findings as follows:
System 1: Fast, automatic, frequent, emotional, stereotypic, subconscious
System 2: Slow, effortful, infrequent, logical, calculating, conscious
This clearly shows that slow thinking is more appropriate to the traits required for trading. So take time over your analysis. And you can do this – and make well thought out decisions – by trading from a daily, or higher, timeframe.
Trading long term will give you confidence that you made the best choice based on the information you had available to you at the time. You won’t always be ‘right’ (the market can upset even the most high probability set-up). But you will have conviction in your ability to make good decisions – and over time the payback will be a high yielding equity curve – with little effort.
Less work
This is my favourite advantage of long term trading. Less work!
It is logical to conclude that if you have fewer bars to analyse then your analysis must be over in a shorter time. If a new bar is only being printed monthly, weekly or even daily there’s only so much you can do before you start repeating your analysis.
Earlier in the article I said that most Dynamic Traders trade from a daily chart. But this does not require analysis on a daily basis. Most of the ground work can be done at the weekend by identifying where the trends are. As mentioned before, Dynamic Traders have a number of tools to help identify tradeable charts – some of which are just beginning to trend (most trades will start this way) and others where trends are established (we will look to manage or add to our positions).
There is a weekly weekend routine you can follow, too.
Identify the trend on the monthly, weekly and daily charts (bullish if above the 200 line and any major resistance zones; and bearish if below the 200 line and any major support zones) – discard those which do not agree on all three timeframes
Identify recent price action (chart and candlestick patterns on any of the three timeframes)
Compile your watch list for the week ahead with any charts which looks close to a good entry (a defined breakout or pullback opportunity)
Then, on a daily basis, you are simply required to:
Check your watch list to see if any set-ups have occurred
Place an order if a set-up has occurred
Check to see if positions need managing (i.e moving the stop closer to price action or adding to the trade if trending well)
It will take some time to build up your watch list so stick with it – eventually you will have a great high-value set of opportunities to trade. Remember to include as many asset classes as you can afford to trade (e.g. stocks, forex and commodities). This will give you access to the best (potential) trends.
Once you have a good watch list it will only take you a couple of hours, at the most, each weekend to see if anything needs adding or removing. And each day it will take you a matter of minutes to check the list for new set-ups – and to manage any trades.
Less work means more play – so you have the rest of the day to sit back and relax with your favourite pastime!
Conclusion
Trading doesn’t have to be hard work, time-consuming, difficult or stressful.
Yes, it takes time to build up to this lifestyle – success is rarely achieved overnight. But, once mastered, long term trading will empower you to truly be in charge of your own life.
Focus on consistent, long-term growth. The Forex is not a get-rich quick market.
At PFX, we are known for advocating longer-term trading strategies over shor-term trading. In this section we will explain why we feel that way and help you understand some of the advantages of long-term trading over short-term trading.
To be clear, while we feel that long-term trading is advantageous over short-term trading (Especially for new traders), we understand that many traders enjoy operating in the very short term and there are even a few who are successful at it. It is also appropriate to add that short-term trading can be fun. Some of us here at PFX allocate a small part of our portfolio to short-term trading because it is enjoyable.
However, this section teaches that long-term trading has the potential to be more profitable and provide more risk control, and is more easily learned and executed by new investors.
Beware of mis-information. If it sounds too good to be true, it is!
We think that the disadvantages of short-term trading over long-term trading are ignored for two controversial reasons, and our experience has shown them to be important influencers when traders are entering the market and trying to decide what kind of investor they will be. Here are some of those influencers, and the motives behind them:
1. Biz-op ("business opportunity" or "get-rich-quick" programs)
The retail financial world is overrun by seminar companies, advisors and system producers. It is more exciting to talk about a super easy, short-term system with high-returns, and it sells much better. These companies know that. They advocate lots of trades, excitement and big profits—even if it will only produce lots of commissions/spreads, anxiety and fast losses. This works for them because it means they are frequently in contact with you, and it is easier for you to become dependant on their advice, tools or system.
2. Dealers
This one is pretty obvious. As you can imagine, the more trades you make, the more money they make off your account. A higher volume of trades means more income for dealers—even from a small account. A lot of the free education offered by dealers is oriented around short-term trading for that reason.
Key differences between long- and short-term trading
Here are the differences we see between the two types of trading and what you need to be aware of as you make decisions.
The Spread
Short-term forex traders immediately face a disadvantage because they trade more, and have to overcome the spread more often.
To make a 1,000-pip profit when trading the EUR/USD, a long-term forex trader can make one trade that moves 1,002 pips (assuming the spread on the EUR/USD is 2 pips). He has to make 2 pips to overcome the spread.
To make a 1,000-pip profit when trading that same EUR/USD pair, a short-term forex trader who makes 50 trades must make 1,100 pips (again, assuming the spread on the EUR/USD is 2 pips), because he has to overcome the spread for each trade.
* That's 100 pips, or 10% more effective that a short-term trader has to be to profit!
I hope you are asking yourself the question, "Why would I want to make my forex investing experience 10 percent harder than it has to be?" The numbers in this example can be modified to fit any scenario, but the point is, more transactions equal more transaction costs. That is good for your dealer but not for you.
And there is no shortfall of good trade opportunities in long-term investing.
Over Focus
We find that many traders suffer from market tunnel vision. They are watching one or two pairs in the short term and are unable to see what is happening in the rest of the market around them. The market moves a lot, and potential entries and exits on multiple currency pairs can form quickly.
However, the amount of attention it takes to manage one or two short-term trades with entries, exits and stops can preclude the short-term trader from seeing the trading opportunities on other pairs. Short-term traders who miss these trading opportunities are unable to leverage the benefits of diversification and portfolio management to control risk, which longer-term traders routinely take advantage of.
Flexibility
Short-term traders will often deal with bracket orders out of necessity. A bracket order, or OCO order, means that you have predetermined your exits and have entered those orders at the same time you entered the position.
Long-term traders have a greater ability to adjust their expectations and manage trades, and employ risk control as new information, price patterns and opportunities arise.
Most technical analysts agree that the validity of a trading signal is independent of time frame. Therefore, if the quality of the trading signal is the same, regardless of its timeframe, isn’t it better to give yourself more time, rather than less time, to make decisions?
We think so.
Miscellaneous
Short-term traders miss out on other benefits of operating in the forex. Short-term traders often miss out on rollover, or interest premiums, on a daily basis—depending on when they enter and exit their positions. Longer-term traders can create trades and groups of positions that benefit from interest payments in the long term.
Long-term trading can be less time consuming since you don’t have to watch the live market. Many new traders are working a full-time job, raising a family and having a life while they learn this market. Checking in on your trades and making adjustments every once in a while, rather than constantly watching the live market throughout the duration of the trade, requires a lot less time and can be easily scheduled around your daily routine.
Short-term trading requires a lot more attention to the market on a continuous basis. A much talked about aspect of trading is the toll it can take on you emotionally. The longer you are in front of your trading screen watching the market zigzag back and forth between your limit and stop, the more tempting it can be to interfere with your strategy. That emotional toll increases the stress of trading and can make the whole experience unpleasant.
