Somewhere between a day trading and swing trading

hamedtintin · December 8, 2015, 8:20pm

Hi, just a quick question.
Trading on spot certainly makes sense for day traders and scalpers but if I happen to decide to hold on to my small position(s) a little longer than a day like two or three days and not longer, should I go for the future and pay more spread or accept the rollovers and stick with the spot?

pbx · January 9, 2016, 9:03pm

I can only say that holding trade over night is a swing trading. I’ve never heard of anything in between, AFAIK.

Clint · January 10, 2016, 3:44am

Swing trades are generally much longer than “overnight” trades.

Short-term trades that are longer than day-trades, but shorter than swing trades, can be labeled any number of ways. But, the simplest way is just to call them [B]short-term trades.[/B]

Here is one way to divide trading into 5 styles, ranging from scalps that might remain open for just seconds, to position trades that might remain open for years:

Clint:

As to your question, above, about how long trades might last, on average — I’ll answer in terms of trading styles, with suggested chart time-frames. Please understand that these numbers are somewhat subjective; other traders might offer significantly different numbers. Anyway, here is my answer:

• A scalp (or scalping trade) is a trade in which the entry and exit are expected to occur seconds or minutes apart, and the profit target is 30 pips or less. True scalping trades are normally too fast to lend themselves to multi-time-frame analysis. Often, a true scalper is focused on one chart only — either a 5-minute or 1-minute chart. Some scalpers work entirely off tick-charts.

• A day-trade (or intraday trade) is a trade in which the entry and exit are expected to occur within the same trading day, and the profit target is 30-100 pips. Appropriate charts might be the 4-hour, 1-hour and 5-minute charts, as Andy recommends.

• A short-term trade is a trade in which the entry and exit are expected to occur within 2 to 5 trading days, and the profit target is 100-300 pips. The same trio of charts recommended for day-traders, above, would be suitable for short-term traders.

• A swing trade is a trade in which the entry and exit are expected to occur a week or more (up to several weeks) apart, and the profit target is 300-1,000 pips. Suitable charts for this style of trading might be the Daily, the 4-hour and the 1-hour charts.

• A position trade is a trade in which the entry and exit are expected to occur weeks, months (or even years) apart, and the profit target is 1,000 pips or more. A position trader might choose the Monthly, Weekly and Daily charts.

None of this is cast in stone. The only thing that really matters is what works for you.

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hamedtintin · January 11, 2016, 9:44am

I’m grateful for your thorough break down. Though I was hoping to know what market would be more viable for a short time trader, futures or spots?

Clint · January 13, 2016, 1:49am

My previous post was not directed at you — it was a reply to pbx, who seemed to think that 'overnight" trades are swing trades.

Well, if you were hoping for a definitive, one-size-fits-all answer to your question, I’m sorry to disappoint you — there is no such simple answer. Just as there is no simple answer to the question: Which broker is better? Oanda or FXCM?

So, the best you can hope for is a lively debate between some knowledgeable person advocating Spot FX, and some other knowledgeable person advocating FX Futures. And here is the best debate I’ve seen on this question —

Dueling markets: Forex futures vs. spot forex | Futures Magazine

Note that this article appeared in [I][B]Futures [/B][/I]magazine back in 2011. But, it is still current and accurate, in my opinion. Will it answer your question? No. But, it will give you two opposing viewpoints, from which you can make your own informed decision.

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