As traders in the ever-changing market(s), it is always wise to look at different time frames.
Short-term trading typically uses a 3-6 month daily chart, a 30 or 15-minute chart, a 5-minute chart, and a 3 or 1-minute chart to spot a high potential trade and time the entry.
Long-term trading or investing uses a 12-36 month daily chart, some may look at fundamentals as far back as 10 years, and look at a 6-3 month daily chart to spot good trade candidates and time the entry.
Take a look at the fiscal year as a time frame too. The market is cyclical.
An even grander view of the financial markets can be measured from decade to decade or in Bull and Bear market cycles.
- Typically the first quarter of the fiscal year has the most momentum creating trends to trade.
- Second-quarter brings us the earnings from the first quarter which continues some of the moment but you can see the beginning of slowed momentum.
- Third-quarter, everyone “Goes on Vacation:” and the market is basically flat or drifting sideways or slightly downwards This might be considered the lazy, hazy days of summer.
* The fourth quarter rolls around and all are “back in school”. The market momentum picks up and we start into more trends.
It makes sense to change trading strategies when the momentum of the market changes.
In a trending market, buying or shorting stock works well. Buying call or put options also works well, even when you trade eminis. Directional trading strategies do well in a trending market. You will find larger momentum moves in the futures markets in a trending market.
When the momentum slows down and markets channel sideways, look at other strategies to sustain your trading business. Spread strategies come to mind. Channeling stocks, Covered Calls, Selling Puts. All of these strategies are taught at WealthBuildersHQ and are available at the beginning level to the advanced. Robert Roy, founder of WealthBuildersHQ, is an extraordinary educator and trader.
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Not all strategies have the same potential rate of return, but sometimes a strategy with a lower rate of return is better than no rate of return. Something to consider.