Mastering short-term and long-term trading

Consider short-term trading as playing Jenga. Each move, each decision, requires that perfect balance. Just as skill and strategy are needed for a well-played Jenga game, successful short-term trading demands precision and a keen understanding of market dynamics. 

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While short-term trading focuses on quick gains through rapid buying and selling, long-term trading is more like playing chess. It requires foresight, strategy, and patience, where every move is part of a larger plan. Just as a chess game unfolds over time, long-term trading involves holding positions for extended periods to achieve substantial rewards. 

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Let’s break down the art of short and long-term trading block by block.

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What is short-term trading?

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In the world of trading, ‘short-term’ could mean anything from a few minutes to several days. Often termed day trading or swing trading, short-term trading involves the buying and selling of financial instruments within a relatively short time frame. 

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Unlike long-term trading, short-term trading demands a keen understanding of market trends, technical analysis, and a disciplined approach.

What is long-term trading?

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Unlike the fast pace of short-term trading, long-term trading is more methodical and focused on the bigger picture. It involves holding positions for weeks, months, or even years, based on a thorough analysis of market fundamentals such as company growth, industry trends, and economic conditions. Long-term traders are less concerned with daily price fluctuations and more focused on steady growth over time. This approach requires patience and discipline, as the goal is to allow positions to grow and mature, ultimately leading to substantial rewards in the future.

Short-term trading platforms for beginners

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For short-term trading, traders can use any of Deriv's platforms, whether that’s Deriv MT5, Deriv cTrader, or Deriv X for CFDs. These platforms provide access to a wide range of trading tools and real-time data, enabling quick decision-making and execution for short-term strategies.

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Now, let’s explore some tips to help you get started with short-term trading.

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How to get started with short-term trading for beginners

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1. Hit the books and educate yourself

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The foundation of any short-term trading strategy lies in knowledge. Stay informed about financial markets, economic indicators, and the factors that drive price movements. Continuously monitor reputable financial news sources to keep yourself updated, and make use of online courses to increase your own knowledge and understanding. The more you know, the more confident you can become to make informed decisions.

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2. Get technical with technical analysis

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Mastering technical analysis is crucial for short-term traders. It’s all about reading the market — charts, trends, and key patterns. Indicators like moving averages, relative strength index (RSI), and stochastic oscillators can provide valuable insights into market conditions. They are a helpful guide in the often volatile world of short-term trading.

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3. Manage your risk and control your trades

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Financial markets are fast-paced. Short-term trading involves rapid decision-making, and here’s where managing risk becomes your safety net. Determine your risk tolerance before entering a trade, set stop loss orders to limit potential losses, and diversify your trades to spread risk. Remember, only trade with what you can afford to lose. 

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4. Develop a trading plan

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A well-defined trading plan is the backbone of any short-term trading strategy. Outline your financial goals, risk tolerance, and preferred strategies. Define clear entry and exit points, and stick to the plan even when emotions run high. Keep reviewing and adjusting your plan as you grow.

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5. Stay calm and disciplined

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Don’t let emotions cloud your judgement and lead you to impulsive decisions. Stick to your strategy, avoid chasing losses, and resist the temptation to deviate from your plan. A disciplined trading approach will help you navigate the emotional roller coaster that can often accompany short-term trading.

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6. Upgrade your trades with technology

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Leverage technology to boost your trading efficiency. Use your platform’s trading tools and stay on top of real-time market data. Take advantage of automated trading systems that execute trades based on your predetermined criteria — it’ll help you seize market opportunities without needing to constantly monitor your trades. 

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7. Reflect, learn, adapt — continuously

The financial markets are dynamic and always changing. Make it a habit to evaluate your performance, analyse successful and unsuccessful trades, and identify areas for improvement. Use every opportunity to learn, and keep adapting your strategies as you evolve with the market. 

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Long-term trading platforms

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If you’re looking to apply long-term trading strategies, consider using Deriv’s MT5 swap-free accounts. These accounts are ideal for holding positions over longer periods without incurring swap fees, making them more cost-effective for longer-term traders. However, be aware that an administration fee applies for positions held overnight after a five-day grace period, during which no fees are charged. You can find more details on this here. 

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With a suitable platform in place, here are some tips to help you start long-term trading.

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How to get started with long-term trading for beginners

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1. Focus on fundamental analysis

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While short-term trading leans on technical analysis, long-term trading requires understanding the fundamentals. Research a company’s financial health, industry trends, and broader economic conditions. This will help you identify strong long-term investments that have the potential for sustained growth.

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2. Patience is key

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Long-term trading is about patience and commitment. Hold your positions for months or years, even when the market fluctuates. Stay focused on your long-term goals and avoid making rash decisions based on short-term volatility.

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3. Diversify your portfolio

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In long-term trading, diversification is essential. Spread your investments across different asset classes, industries, and markets. This approach reduces risk and increases the likelihood of steady returns over time.

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4. Regularly review your positions

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Even with a long-term strategy, it’s important to review your portfolio regularly. Stay updated on market conditions and company performance. Adjust your portfolio when necessary to ensure it aligns with your long-term financial goals.

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Trading, whether short or long-term, is a continuous journey that demands a blend of education, discipline, and flexibility. By equipping yourself with the right strategies and a commitment to ongoing learning, you’ll develop the tools and mindset needed to navigate the markets' ups and downs, whether you’re aiming for quick gains or long-term growth.

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Practise your strategies with a free Deriv demo trading account. It comes with virtual funds so you can test the waters risk-free. When you’re confident in your strategies, upgrade to a real account to start trading with real money.