Traders and investors operate across a number of different time frames. This is as relevant to cryptocurrency markets as it is to other markets. It is important to be aware of what time frame you are operating with when entering a trade, and it is particularly important not to change time frames just because a trade isn’t working out the way you planned. The main time frames include:
-Long Term Investing
-Swing Investing/Trading
-Intraday Trading
LONG TERM INVESTING
Long-term investing are typically positions you take from months to years to even decades and beyond. Warren Buffet is considered by many the ultimate long-term investor. Buffet has had an extraordinary career, and has maintained an intense focus on compounding his wealth throughout his life from a very young age. Some of the important things to be taken into consideration with long-term investing include:
-Opportunity cost
-Compounding
-Risk Management
-Portfolio Management
-Intensive research
A thought exercise which Warren Buffet conducts with students is to imagine you had a punch card with 20 slots. Each time you make an investment, you have to punch a slot in, and you can never punch more holes than the 20 slots you are given. This is an interesting thought experiment as it covers a lot of the bullet points mentioned above. If you knew you just had this amount of investments to make in the lifetime, you would be extremely diligent with your choices. As a result, if you are putting your capital where you forecast has the highest chances of providing future returns, then you will be minimising estimated opportunity cost.
SWING INVESTING/TRADING
Swing investments/trades can widely vary in how long they are held for. These positions could be held for a few months or they could be even held for just a few days. An example of a swing trade would be anticipating an event such as an earnings announcement having a positive effect on a security’s price so you enter a position before the announcement. An example in relation to cryptocurrency may be identifying a lower cap coin which you feel is undervalued and offers huge promise so you take a position in anticipation of the coin gaining more exposure and growth going forward. Key things to take into consideration for swing investing/trading include:
-Opportunity cost
-Risk/Reward analysis
-Fundamental analysis
-Technical analysis
-Market sentiment
-Events
-Crowd behaviour
-Exit Strategy
INTRADAY TRADING
Intraday trading is called such because no positions are held overnight. Intraday positions could be minutes to hours and could also be very short such as seconds to minutes. Traders who trade for very short time frames are known as scalpers. Scalpers profit from anticipating price changes in the market. Scalping is as high intensity as trading will get. Profitable scalpers are known for cutting their losses quickly while letting their winners run. This is extremely difficult as it goes against our very nature as humans according to prospect theory. Other intraday traders plan out their trades extensively by utilising technical analysis, and may stay in their trades for a longer timeframe than typical scalpers. One technical analysis technique which is used is to conduct analysis on the longer time frame charts such as 1w, 1d, 4hr to get the general idea of the historical price action, and then utilise 1hr and below time frame charts while intraday trading. Key performance traits for intraday trading include:
-Personal psychology
-Discipline
-Risk/Reward analysis
-Technical analysis
-Order book analysis
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