Here's something most people don't talk about but is a general curve that traders follow as they mature in the space. It deals with how traders actually trade, whether it be short term, mid term, etc.
Most people start off with very small portfolio sizes, maybe a few bucks.
Most people start off with very small portfolio sizes, maybe a few bucks.
It makes sense at that level to do daytrading, scalping, arbitrage, or other forms of "quick money" that you can repeat many times even in one day. It allows you to be super flexible and take advantage of news as it comes, as well as guaranteeing liquidity should you need it.
Eventually though, your portfolio size gets a bit too big to market buy/sell without moving the markets - you also loosen your stops due to the same reasons as above. If you get stopped out at a 10% loss you dont want to trigger a huge sell wall there, making things worse.
That's when trading mid term starts to make a bit more sense - you can also call this swing, or position trading. It's the main practice most non-daytraders engage in and lets you take your time building positions over days or weeks while also allowing you time to sell if needed.
One drawback to this strategy is the lack of reaction speed you get, you simply can't exit many markets doing this kind of thing on a dime. The benefits more than outweigh the downsides though, as you are able to play with a much larger stack and take advantage of time.
As your career continues, you may eventually evolve to a long term trader - this is the kind of trader with a massive position in any given asset which will take many days or weeks to unload when its time to sell. Daytrading and position trading are now things of the past.
This long term "investment" style generates massive wealth because you don't need a large multiplier to do so. If you're flipping a dollar 2x you only made 2 dollars. But a million? This investing style suddenly makes a lot of sense.
The lesson is: Recognize where you are on that investor curve, what the size of your portfolio is and how best to utilize it on the markets - a long term strategy with a small port will not generate returns, just like a daytrade strategy will prove disastrous with a large stack.
