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SHORT TERM OR LONG TERM TRADING?
Which trading approach has the prospect of making more money – short term or long term? First, a definition of each – short term refers to a system that usually lasts from one day to several days in duration. Long term refers to a system that could last from one day (depending of the volatility of the moment) to several weeks in duration.
Consider the trading parameters of each. Both the short term and long term have the same target exits and same general entry signal parameters. The only differences are that the short term has a much smaller stop loss exit, while the determination of the market reversal decisions are – less for the short term, and longer for the long term system. In other words, each system trades the same with the difference that one is specific for short term trading, while the other is suited for longer term trading. Basically the same trading systems.
System A:- short term. Figures are from SP03H (Jan\03) to SP06H (Jan\06 ), about 3 years. If one trade = 1 contract, there were 252 trades. After allowing $60 per trade for slippage and commissions, the net proceeds were $245,860, with the % correct trades at 52% and the profit factor at 2.5.
System B:- long term. Figures are again from Jan.\3\03 to the current date in Jan. 6\06. One trade = one contract. There were 75 trades during that period. Again, $60 per trade allowed for slippage and commissions. The net proceeds were $89,375 with the % correct trades at 69% and a profit factor of 2.1.
End results – short term much better as far as net proceeds are concerned. Much much better. The profit factors were almost the same. The big difference is in the number of trades over the three year stretch – 252 vs 75. That’s about an average of 84 vs 25 trades per year or around 4.2 vs 1.25 per trading month. It is understandable that the % of correct trades would be less the more you trade.
Which is for you? The longer term is more laid back, with lots of time to consider your place in this hectic business – less stress. The shorter approach may go a ways in satisfying those looking for more action – besides more money!
Decisions – decisions. What we need is a system that requires no decisions on our part - and a guarantee of success.
GOOD LUCK AND GOOD TRADING
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