When investing, time is an important factor to consider. This brings into focus two aspects of investment that are common in the trading market, long term trading and short term trading. Each of them is good in its way though there have been raging debates on which is the best of the two.
If you are a trader in the financial markets you are subscribed to either of these depending on your trading strategy and goals. In a bid of sorting out this debate, we are going to have a look at both trading aspects and see where either outweigh the other.
Trading Goal
You trading goal is whatever you aim at accomplishing when you get into trading. Many traders have different goals with some wanting to learn more about the market, another fraction wants to gain a quick buck while the remaining want to invest for the long term among others. These are some of the goals that you can subscribe to as a trader. So which is the strategy to pick looking at some of the common goals above?
If you want to learn about the trade, the short term trading stint is a good as you can take note of the various occurrences in a short time and come up with worthy conclusions. However, when looking at the exposure aspect of trading, then the long term trading stint is the best way to go. This is because you learn of various concepts that you would otherwise miss in a short trading period.
The long term trading stint also takes the price if you want a long term investment plan that sort of acts like a savings plan with a hint of price change.
Trading Risk
He risk means the chance of landing a loss in the markets. One thing you need to know when looking at this market is that it is very dynamic in various facets and price fluctuations are the order of the day. No one wants losses and the risk draw the thin line between a profit and loss when you enter the market.
Short term trading is more prone to risks as most of the time you take advantage of the minor price movements brought about by the price fluctuations. Long term trading also comes with its risk though most of the time it is not as pronounced as in short period engagements. This is because over the long period you invest the price may drop and ultimately pick up.
Profitability
Profitability is another to look at to determine which the best way to go is. Both have the profitability factor that is dependent among many factors one of them the base investment capital. With short trading stints, you can earn small profits which if earned throughout the day from minor price shifts can bring in decent results. Long term trading may yield massive result or also be a flop. This usually depends on the capital invested and also the prevailing market conditions.
If you get right your investment in both setting then you can bring in decent profits.
Suitable Trading Instruments
Single assets such as forex pairs, indices, shares, and commodities are good for short term trading with most day traders picking them up. Long term trading fits the bill perfectly with derived assets such as CFDs, options, and futures.
However, you can still get into long term trading strategies with single assets such as commodities which you are sure to appreciate at prices in later dates.
Loss Management
When it comes to loss management it depends on the strategy you pick. However, the common loss management tools used are the stop-loss order and hedging for short term and long term trading stints respectively.
Final Thought
The debate cannot end due to the favorable factors each side presents as their argument. Both are decent approaches to pick and as earlier indicated, your goal and investment should be your guiding factor.
