Are short term traders at more risks in the market?
Tagged: demo trading account
Posted In: Investing
Most of the time, traders in the market think longer timeframe traders are at safer zone in the market. But this thinking is prevailing among the short time frame traders only. They are true in one sense as shorter time frame traders take large risks to make a profit in the market. It is not like that the longer timeframe traders will not take risks in the market, but they have the greater chance of winning against all the odds in the market as their trades remain in the market for days, weeks and sometimes for even months. Most of the time the short time frame traders have to face too many false spikes in the market and thus they are most likely to lose money. On the contrary, the long time frame traders use wider stop loss and price action signal to execute quality trades in the market which is much safer.
Today, we are not going to discuss the risks of short timeframe trading or the benefits that traders can get if they use the longer timeframe. We will try to give you an answer if the short timeframe traders are really at risks in the market and if they take more risks than the other traders. Some of you might think that short time frame trading is the best way to make money but after you finish reading the remaining part of this article we can assure you that lots of things will change in trading mentality.
Yes, they are at more risks
A trader who likes to trade the market with a shorter timeframe is at more risks than the other traders who trade the market with the higher timeframe. Their risks not only involve the risks of making less profit or making a loss, they also take the risks of losing their capital in the market. Most of the rookie traders in the financial market loses money since they start with the short time frame trading technique. Sometimes the luck might favor them but in the long run, they will become the ultimate loser in the financial market. For this very reason, the expert traders always suggest the new traders to use demo trading account to develop a solid trading strategy before they start trading the live assets in the financial industry.
Real life example
If you are a day trader in the market and your friend is a positional trader, who do you think will take the more risks each time they trade the market? Your friend will always be taking fewer risks in trading because he is trading with the positional strategy. He can keep his trades in the market open for months. It is very certain that if there is any market volatility or the market is changing always at a high rate because of a news release, the noise will be less in the higher time frame. On the other hand, you are a day trader. You cannot keep your trades open for next day and you have to take actions for your trading. You will most likely close your trades and make a loss. You cannot take the benefit from the market movement since you can afford to keep your trades open like your friend. You have to take the immediate heat of the market. It is the best example that can open your eyes about who are taking the more risks in the Forex trading.
You must be logged in to reply to this topic.