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In foreign exchange trading, choose short-term trading or long-term trading

2022-03-23

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　　In foreign exchange trading,there is a big difference between long-term trading and short-term trading.The biggest difference should be the length of the operation cycle.Long-term trading is called long-term trading,and short-term trading is called short-term trading.So how should investors choose long-term trading?Trading or short-term trading?What factors influence investors'choices?

　　Short-term trading vs long-term investment,between active and passive,choose one

　　You need to constantly learn the best way to make money.In finance,you can decide to follow a few strategies to make it happen.

　　First,you can be a sell-side analyst(which means providing reports and analyzing data to investors),investor or trader.

　　The difference between a trader and an investor is the way they allocate their capital.Investors look at the intrinsic value of an asset and then allocate capital for long-term value.On the other hand,traders see short-term opportunities when they look at the market.

　　When we started our trading journey,we were inspired by the careers of giants like Warren Buffett,arguably one of the best fund managers in the world.

　　Our goal at the time was to be a value investor.Over time,however,we realized that long-term investing is not for everyone.The reason Warren is so successful is that he has a fund that allows him to acquire a large share of a company.For someone with only a few thousand dollars,this is difficult to do,especially when using leverage.

　　market cycle

　　Markets are cyclical.At some point in time,asset prices will rise,and at other times,the market will fall.As a long-term investor,you may not be able to adapt to market cycles.

　　During the 2008 financial crisis,most investors lost money.Giants such as Warren Buffet and Ken Griffin lost more than 20%.On the other hand,hedge fund Renaissance Technologies has had the best year this year,with gains of more than 80%.

　　This is because,as a trader,you can make decisions in a very short period of time.At the same time,you can also enter and exit trades based on the direction of the trend.

　　Uncertainty

　　Markets are hard to predict.A good example is the price of oil,where no sell-side analyst correctly predicted a drop in price(which is all that matters).

　　Likewise,in 1999,sell-side analysts were busy writing reports praising tech companies they thought would be the next Coca-Cola.In 2000,the bubble burst,and investors who followed these analysts lost money.Or simply think of the Covid-19 emergency that swept the world in early 2020,when the Vix index surged.

　　Things will change.When Warren invested in Coca-Cola in the 1980s,the market was enthusiastic.Now,people are turning to healthier beverages due to Coca-Cola's health concerns.

　　capital requirements

　　For investors,to make money,you need a lot of money.Especially since you are the owner of the company.So if you have very little investment,big investors won't listen to you.

　　As mentioned above,the reason Warren Buffett has become so successful is that he has billions of dollars.Therefore,he can easily acquire any company and influence decisions.For an average trader,there is no point in owning a company where he has no voice.

　　Lots of work:long-term investors

　　To be an effective long-term investor,you need to do several things.For example,you need to present your point of view to company management.This can be achieved by becoming a board member of the company.Alternatively,you can do this by being an active investor by expressing your views openly to management.

　　The challenge with doing this is that you need to have some ownership of the company.As mentioned above,a person who owns less than 1%of a company's shares is likely to be ignored by management.Therefore,you also need to have some media contacts to ensure your views are heard by management.It's all so hard!

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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In foreign exchange trading, choose short-term trading or long-term trading

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