|Some traders specialise in holding a trade for less than an hour, others hold them days or weeks, even months. There is of course no right or wrong answer as to what time frame to trade in so why not trade experiment, for example -
- Some ultra short term trades, lasting a few hours
- Trades lasting 4-8 hours
- Trades held for 1-2 days
- Trades held for up to a week etc
What you might find is that you tend to favour a timeframe that reflects your personality. For example, someone reading this might be a go-getter, always on the move, always something happening in their life. If so they'd naturally lean towards short term trading the markets, ie where are prices moving over the next few hours, day or a maximum few days.
Another reader might be laid back, more of a thinker and plotter. If so, it's odds-on they'd be no good at short term trading. Instead, medium or longer term moves would probably be their preferred strategy and overall market outlook.
This is why experimentation is so worthwhile at this stage as it helps to define the timeframe best suited to you.
Take note of costs - especially for short term trades
Most people think there's only one way to lose money in the markets - you get the direction wrong. Whereas that's obviously the dominant reason there's actually another way, and one which many discount - the role that costs play.
Every time you trade there's a cost usually made up of commissions + the bid-offer spread. Commissions are not charged with spread betting but there is a bid-offer spread and that can become a major trading expense depending on how active you are and how short your timeframe is.
Costs are the number one reason why it's so hard for the majority to make a profit via day trading. Remember, the cost of trading is added to each loss and subtracted from each profit.
For example, take the assumption that a trader makes an average profit (before costs) of £100 and an average loss (before costs) of also £100 and assume costs run at £10 per trade -
- Gross profit will be £90
- Gross loss will be £110
And it's that £20 difference that's often so hard to overcome especially for ultra short term traders.
Having said that I strongly encourage you to short term trade the markets during the next 3 weeks so you can find out for yourself how tough it is in real-time trading (risking a maximum of 10p a point).