In options trading, many beginners become confused about the timeframe. One of their most common questions people have is – “which timeframe should we choose for trading”? Actually, we can’t just give you a direct answer right now because each of you will prefer working on various holding periods. Therefore, stay with us and read about the suitable duration for each trading style.
Before diving deeper, we will teach you the two major types of holding period that every newbie should know about. Here are the two major types –
- Lower timeframe
In this type, a trader has to retain his bought asset for a shorter duration, which ranges from a few seconds to an hour (or a few hours). As a beginner, you should avoid this one because the shorter trades need to be executed within a very short time, and it becomes quite challenging for novices.
- Higher timeframe
In this type, the investor has to hold the purchased financial instrument for a longer period, which ranges from a few days to weeks. Some traders in the United Kingdom also hold this for a couple of months. Professionals advise newbies to choose this one because it will help them make the right decision. In addition, they can study more about the options market. Once you get a clear idea of the basics of a higher timeframe trading strategy, you will be able to trade with less stress.
Major trading styles with the timeframes
Forex traders follow different trading styles, and each of them is based on a different holding period. Therefore, before jumping in to make money, learn about the major trading strategies.
1. Position trade and its timeframe
A newbie can enter the industry as a position trader, in which he will have to hold the currency either for a few days or few weeks. The value of the currency pairs fluctuates from time to time. Many novices try to avoid the ups and downs of the trading business, which is actually impossible. While following position strategy, make sure you hold the asset for a longer duration because it will help you analyze the market more accurately.
2. Swing trading and its timeframe
It is another popular strategy in which the investor has to hold his currency for the long-term. Analyzing a longer duration and chart will help them to find a better option to place the trades. The difference between swing and position strategy is – in this strategy, one can hold his trade for a shorter time or can wait for a swing, but in position style, he may have to hold it for a longer duration. These traders check the chart two times a day to find a bigger move to execute the chance.
3. Day trade and its holding period
Now it is time for the professionals because this style can be a little harder for the novices. In this style, people need to make the decision very quickly because the holding period is too short. Therefore, a single wrong step can blow the account. This method can provide newbies with greater opportunities to enter trades frequently. In this strategy, a professional holds his assets for a few hours (maximum), but he has to execute it within the day.
4. Scalping and its holding period
This is considered the riskiest method for the options trader because the duration ranges from a few seconds to a maximum of 20 minutes. So, while doing this, make sure that you have good knowledge of using technical indicators like momentum, moving averages, divergence and convergence, and so on. To identify the entry and exit points, a newbie must know the use of tools in the chart.
These are the four major trading strategies. So, what do you think of the timeframe? We will advise you to go for longer/higher ones instead of a shorter period.