What is Trading? Different types of trading according to timeframes
Trading is the exchange of products and services between two parties. It is the fundamental idea that underpins all economic systems and financial transactions.
Trade drives the wheels of growth in any culture and enables wealth generation. A market is a location where any trading takes place. The market is determined based on the type of items.
For example, the stock market is where stock trading takes place. Similarly, the crypto market is where crypto trading happens; in a forex market, currency trading happens.
You buy something at one price and sell it at a higher one, perhaps generating a profit, and vice versa. Trading gained massive popularity during the COVID-19 pandemic when people were locked in their homes and lost jobs; they realized the value of having a secondary source of income and investment.
This drove a large sum of capital into the markets and was one of the major factors to lead the market to new highs even after a big crash in the pandemic.
People buy and sell stocks, crypto, forex, and other instruments and make a living.
Now the question arises, how do they do it?
The answer is simple: traders use online platforms such as TradingView to keep an eye on the charts.
Crypto traders use platforms like Binance, LordToken, etc., to buy and sell cryptos.
Apart from using these trading platforms, traders use different time frames to make gains in the market.
A time frame is the length of time that a trend in a market may be detected and utilized by traders.
After finding out the trend, thorough analysis, and risk management, the trader places a trade, and if he is right, he earns.
In this blog, we will be discussing trading strategies according to various time frames.
Trading can be done on various timeframes, but before choosing a timeframe, it is essential to have the amount of time you want your money to be invested in the market.
How do you find it? It is pretty simple; you need to identify what trade personality you have. Are you a daily trader, swing trader, or long-term trader?
Now let's discuss the various time frames with examples and according to your trade personality:
Day trader timeframes: 1M, 5M, 15M, 30M, 1HR
A daily trader or intraday trader is a person who buys and sells an asset on the same day.
In the below example:
A day trader noticed that a parallel channel was forming in the 15 minutes time frame (TF). He waited for the channel to break on either side (upside/downside).
After clearly indicating a bearish momentum as the channel breaks, he opens a short position. He made money as the market kept on falling.
The trader could make a quick 3-4% return within an hour on his investment.
A day trader takes many trades in a day and is an active participant in the market.
Swing Trader Timeframes: 4Hr, 6Hr, 12Hr, 1Day, 1Week
A swing trader is a trader who invests his money for a few weeks in the market, and once his position is in profit, he books the profits.
In the example, the swing trader observed that the price of BTC was trading in a range for 10 days, which indicates that a strong movement can happen on either side.
The price rallied upwards, and the trader opened buy positions at the retest levels.
The price kept on rallying for two weeks, and the trader made a whopping 43% Return on Investment within a short span of 2 weeks.
Swing traders take less amount of trades. Their trades are solely based on convictions and detailed research about the price moments.
They usually aren't active market participants and occasionally take daily rates; they prefer taking positions for a week or two and then making gains.
Long-term trader timeframes: 1 Day, 1 week, 1 Month, 2Months, 6Months
A long-term investor puts his money on the dips to maximize his gain in the long run (typically more than three years.)
In this example, the long-term trader/investor observed that the market had felt too low. He started putting his money at the low levels; once the price started consolidating, he kept buying BTC.
After the price broke the range and traded upwards, he made consistent gains for over three and a half months and nearly doubled his investment by creating a massive 96% gain.
Long-term traders only look for buying opportunities at low levels, their investment time horizon is usually more than a year, and they are majorly inactive in the markets. They only become active during bear markets or when a massive dump is in the market.
These are the various trading strategies and styles that traders shave. You can trade in any time frame per your trading style and plan.
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