Defining Short, Long and Middle Term Positions in Stock Marketby Ovais Mirza Director, DICC
The timing of a financial investment corresponds to the investment horizon. It can be short, medium or long term. The timing depends on your performance objectives and your investor profile . Each positions and terms has advantages and disadvantages.
A short-term investment is between one hour and one week. We are not talking about investment but trading. Below an hour, we talk about very short term trading which includes scalping but also certain day trading positions. If you use technical analysis, you will display graphs ranging from 15 minutes to 4 hours.
- Ability to quickly obtain performance
- Time-consuming: the short term requires regular monitoring of the trade (modification of the stop loss, trend reversal, etc.)
- Significant transaction costs: A short-term trader places a large number of orders and pays the spread and / or commissions at each round trip. This has a negative impact on performance.
- Greater stress: Watch the price graphs generate stress.
A medium-term investment is between one week and several months. We can then speak of investment. You can then integrate the notion of fundamental analysis in addition to technical analysis. If you use technical analysis, you will display daily charts.
Advantages of the medium term
- Adapted to a larger panel of individuals
- Performance determined by the trend of the assets in the portfolio
- Reduced stress
Disadvantages of the medium term
- Requires more analysis than the short term for the choice of assets.
- Impact of macroeconomics / microeconomics
A long-term investment is between one year and several years. In this case, the rules for portfolio management apply. If you use technical analysis, you will display charts in weekly or monthly.
- No stress
- Requires very little time: No need to regularly monitor the evolution of positions
- Very low transaction costs: There is no frequent return trip and you pay the spread and / or commissions only once.
- Strong earning potential: the longer the investment horizon, the greater the earning potential.
- Possibility of placing large sums while having reduced risk (with good diversification)
- Adapted to all investor profiles
- Possibility of having your portfolio managed ( UCITS )
- Requires not to need your savings for the entire duration of the investment
- Request to perform an in-depth analysis: the technical analysis is insufficient, you must also carry out a fundamental analysis
- Can have a significant negative impact on your assets in case of bad investment timing.
Created on May 9th 2020 02:11. Viewed 200 times.