Short-Term Strategy for Long-Term Trading | Scalping, Intraday, and Mid-Term Swings

When aspiring traders are involved in financial markets for the first time, they come with bursting enthusiasm, believing that, in the shorter term, they will harvest the profits of their lives. That is a more typical case nowadays with digital assets and cryptocurrency investments.

Rapidly, these novices face a painful truth: capitalizing on market fluctuations is hard, and trading is a demanding activity that requires more than one strategy and technical aspects.

Furthermore, they bear a short-term bias that leads them to try a more challenging procedure as it is scalping. The lack of knowledge about risk management, leveraging, and the detrimental effects of overtrading push them into rampant losses.

Now, the questions are:

• Are losses bad? They are regular outcomes that traders need to manage appropriately.
• Are short-term strategies the wrong way to approach the market? -No.
• Can the short-term method ride with the long-term? -Yes, and professionals use both.

Understanding Long-Term Approach

The long-term mindset offers a wiser pathway to be involved in markets, especially in cryptos, where factors such as volatile conditions, promotions, and constantly evolving sectors and projects make it harder for those non-related to technology fields to keep track of markets.

Long-term approaches are the preferred strategies by hedge funds and long-time professional traders who deeply understand the market dynamics and how crucial it is for long-term survival to not rely just on short-term results.

Additionally, long-term management enables market participants to develop macro systems that attend to all the facets of the market and the pitfalls of traders and investors themself. These facets and pitfalls include:

• Losing streaks for a period.
• The need to offset portfolio gains.
• Market downturns.

A macro approach means a management system that gathers multiple strategies, from trend trading or range and breakout trading to portfolio diversification.

It is pertinent to mention that long-term investment has a distinct element from short-trend trading regarding the purposes of each capitalization method.

Importance of Long-Term

Undoubtedly, traders and investors approach the markets with the sole objective of making profits, which is the primary essence of speculative instruments and procedures.

However, that is not the only reason why markets exist. Beyond the profits-making appetite, markets serve other pursuits, such as the following:

• Companies obtain a public valuation as market participants invest in them, expecting mid-term returns.
• Investors protect their capital in front of economic affairs like inflation.
• Finally, traders speculate to capitalize on short-term fluctuations that might provide a sustainable income.

This distinction is vital to apprehend because it is the basis of management systems and risk mitigations.

In the context of crypto

In crypto, the dynamic does not change much. For example, within traditional instruments and digital assets, we can spot some correlations:

• Gold is an asset that investors predominantly use as a store of value instrument.
• Bitcoin has been gaining that role and continues to do so. Companies like Microstrategy hold a fortune in BTC as part of their accounting, and shareholders hold their shares because of that fortune.
• Coinbase is an exchange and publicly traded company. Regularly, its shares gain or lose according to events related to cryptocurrencies, as crypto products represent its principal source of income.

Why is all this important?

For instance, crypto investors could hold BTC in a portfolio as they look at it as a value reserve in front of fiat money for the upcoming years. At the same time, they might seek scalping, intraday, or swing trading approaches to seize market volatility, survive seasonal downturns, and make an income.

Understanding Scalping, Intraday, and Mid-Term Strategies For Long-Term Trading

The main difference between short-term and long-term is the risk and exposition each method requires. While investments stay in the market for years, trading styles vary from weeks to minutes. Mid-term strategies could last days to weeks to months, like options contracts.

Let's compare:

• Scalping is a high-frequency trading method. Human scalpers execute 1 to 5 trades in a session, and algorithms even more. All at high speed: they enter an exit rapidly.
• Intraday traders may execute even one trade in a day if they catch a trend.
• Swing traders do not even need to enter the market day to day. After they find a swing entry, they only need to wait for the trade to evolve with the market.
• Mid-term options contracts can help traders hedge overall positions for the coming months.

Developing a Management System

When we talk about a management system, we refer to a compensation model that allows traders to handle risks and exposition to, in the short-term, seize volatile opportunities while offsetting downs in a portfolio that, at the end of a period (monthly or quarters), between profits and losses, reaps an income to live on.

This system should comprise the following elements:

• Risk Units: These refer to the position size and the percentage of the account that traders risk per trade in each trading style.
• Exposition: Refers to the time expectations for a trade according to each style.
• Trading strategies: It determines the short-term and mid-term strategies for the chosen trading methods.

Setting Risk Units

The conjunction of risk and exposition relies on leverage in the short-term and capital allocation percentage for long-term portfolios. By setting risk units, traders can manage the inflows and outflows percentages across the system.

Let's see an example table:

Conclusion

Beginner traders focus on short-term strategies on the promise of fast profits. Investors pursue long-term approaches for different pursuits, like storing value or expecting returns from assets throughout a safer process like holding. Professional traders and managers see within these two procedures a way to combine multiple strategies and styles to adopt macro trading that guarantees a final income and long-term survival.

In Altrady, traders can connect multiple exchanges, and through features like Portfolio Manager, Analytics, Risk-Reward Calculator, and Smart-trading, developing a management system is more than easy. Sign up for a free trial account today.