5 Advantages Of Long Term Trading - forex trading on daily charts

5 Advantages Of Long Term Trading ~ forex trading on daily charts

Both short term and long term trading can be effective trading strategies, however, long term trading has several significant advantages. These include the effect of compounding, the opportunity to earn from dividends, reduction of the impact of price fluctuations, the ability to make corrections in a more timely manner, less time spent monitoring stocks.

1. Compounding

Time can be investor’s best friend because it gives compounding time to work its magic. Compounding is the mathematical process where interest on your money in turn earns interest and is added to your principal.

2. Dividends

Holding a stock to take advantage of payouts from dividends is another way to increase the value of an investment. Some companies offer the ability to reinvest dividends with additional share purchases thereby increasing the overall value of your investment. Additionally, dividends are more a reflection of a company’s overall business strategy and success than volatile price fluctuations based on market emotions.

3. Reduction Of The Impact Of Price Fluctuations

In the long term investment the persons is less affected by short term volatility. The market tends to address all factors that keep changing in the short term. So a person involved in long term investment or trading will not be affected as much by short term instability due to factors such as liquidity, fancy of a particular sector or stock which may make the price of a stock over or undervalued. In the long term, good stocks which may have been affected due to some other factors (in the short term) will give better than average returns.

Long-term investors, particularly those who invest in a diversified portfolio, can ride out down markets without dramatically affecting his or her ability to reach their goals.

4. Making Corrections

It is highly likely that you could achieve a constant return over a long period. The reality is that there will be times when your investments earn less and other times when you make a lot of money in short term. There may also be times when you lose money in short term but as you are in quality stocks and have long perspective of investment you will earn good returns over a period of time.

There are always times when some stocks do not perform and it is the wise choice to pull out of an investment. With a long term perspective based on quality stocks, it is easier to make decisions to change in a more timely manner without the urgency that accompanies short term and day trading strategies chasing volatile changes.

5. Less Time Spent Monitoring Stocks

Unlike day trading that can require constant monitoring of stocks throughout the day to capitalize on intraday volatility, long term trading can be carried out effectively using a weekly monitoring system. This approach is most often far less stressful than watching prices constantly on a daily basis.

Overall, investors that begin early and stay in the market have a much better chance of riding out the bad times and capitalizing on the periods when the market is rising.

More info for 5 Advantages Of Long Term Trading ~ forex trading on daily charts:

Read More..

How to Earn Money in Sideways Market - forex trading on 1 hour charts

How to Earn Money in Sideways Market ~ forex trading on 1 hour charts

The fundamental detail for swing trading is determining a market that is trapped in a sideways trading range (also called a congestion area), or in an up-trending or down-trending channel on the chart (remember, channel!). While taking note by the chart, the trader must be capable to discern some clear support and resistance levels that are boundaries of the congestion field or channel. 

When a market price comes close to the support or resistance area boundary, the trader will set up a position: long if prices are actuating lower and close to the support boundary, and short if prices are actuating higher and toward the resistance boundary. It sounds uncomplicated, but remember, trading comprises numerous surprises. 

The price could break out the support or resistance boundary anytime, therefore skills to reply promptly, or effective money management strategies are always vital features of a veteran trader. Swing trading methods can be practiced in whatever chart time frame -- daily, weekly, monthly and intra-day charts. However, the most generally used timeframe for swing trading is the daily bar chart.

Note that the effectiveness of the support and resistance at the boundaries is commonly influenced by the number of times the market has pivoted at the boundaries. The rule is that the more times a market has reached a support or resistance boundary, and then reversed course, the more powerful is that boundary. It can also be said that the longer continues a channel, the more reliable is that channel. Therefore, a trader prefer to* determine a well-established channel or trading range for which to attempt to swing trade.

An exception to this is a market that has been in a trading range, but is bound by one or two potent spike moves, which also indicate a strong support or resistance boundary. That signifies some congestion areas that could offer a salutary swing-trade opportunity do not require numerous pivot points. As a matter of fact, those one or two spike levels would be determined to be a potentially good pivot area for a market.

The swing trader should still apply tight protective stops. As I remarked, a breakout can occur anytime, might due to bad political news etc…Good money management strategies will keep traders away of troubles. A good area to set a protective stop is exactly outside of a support or resistance boundary that constitutes the trading channel or congestion area. For example, if a market in a trading channel is nearing the upper boundary of that channel, the swing trader would establish a short position and would prefer to place his protective buy stop just above the resistance level that serves as the upper boundary of the trading channel. 

In direct contrast, if a market is coming near the lower boundary, the swing trader would establish a long position and place his protective sell stop just above the support level.

More info for How to Earn Money in Sideways Market ~ forex trading on 1 hour charts:

Read More..