For anyone interested in Forex trading it is vital to know the correct time frame to invest in and then today we’re gonna talk about it. Is there a better time to invest than another? Is it a matter of taste?
First, I want to define each of the deadlines according to our own criteria:
Short term – Operations are opened and closed on the same day or week.
Medium term – Operations can last a few weeks, even a month.
Long term – Operations are opened to be closed within a few years, dividends can be part of the long-term investment strategy.
We need to highlight a number of basic short- and long-term advantages and disadvantages before discussing this issue further:
In Favour of Short Term
- Low initial capital is needed to achieve significant objectives.
- Possibility of leveraging without taking significant risks.
- There is the option of working with compound interest (reinvesting capital on a daily basis).
Against Short Term
- Find enough time to operate every day for a few hours.
- Fundamental analysis is useless.
- Decision-making is much faster and should be very automated, we are very bad at thinking under pressure. (Today automatic trading can supply this and the previous point).
- The stock market is often either too volatile at the beginning of the session or too quiet for the rest of the day. The currency market is more constant and has trendy and interesting movements most of the day.
In Favour Long Term
- It offers great tranquility, we have several days to decide what we do.
- Volume analysis takes on great importance by exposing the next price movements.
Against Long Term
- Difficulty to get returns with compound interest, reinvestment becomes slower.
- It is not very appropriate to leverage our money in the long run.
- We need large initial capital and consequently, the risks in absolute value are much greater.
If you have more arguments against or for the short/long term do not hesitate to comment on them.
After putting forward these arguments I think the solution to the initial question is simple. If you have a small capital but you have time and knowledge it is best to invest in the short term (speculate in full rule) and seek an exponential profit. If what you really have is a large capital, knowledge, and little time, it is surely better to invest in the medium/long term looking for dividends and trends of several months.
Be that as it may, NEVER invest on your own if you do not have before you the experience and knowledge that allow you to invest calmly. Reading newspapers is a ruin, buying “cheap” shares are often expensive, reading forums and posts called, “Menudo pelotazo en tal acción” or “I assure you that the euro will fall” is even less lucrative. I’m sorry, guys, this is a lonely job where you have to form your own system, whether it’s short, medium, or long term. In fact, with creating a system there is not enough, you should have at least 5 or 10 to be able to diversify your operations in a smart way. If you don’t have so many systems, you can always copy free from other traders!
Another option available is to try to find a way to have your capital well managed and that means not letting your bank invest it.