One of the most fundamental aspects of trading is determining the time frame you want to trade on, and understanding what it means to trade on that time frame.

Identifying your best-fitting time frame is more than simply deciding that you want to trade a lot, so therefore you must be a near-term trader. You need to consider two things; the time factor and the fear factor. The time factor is pretty straightforward. The more time you have to devote to the market, the shorter the time frame you can trade since you have more time to act and react to changing market conditions. But just because you have a lot of time doesn’t mean you should necessarily be a near-term trader. The market is stressful, and that stress can be compounded if you’re living in the market every day. More is not always better. Seek to find the amount of time that you can sanely be involved with the market. Sometimes taking a more hands-off approach does wonders for the stress level, and that in turn can lead to better returns. Bottom line, if you want to look at the market every day, then the only thing that will make your inner trader happy is by using a near-term approach. If instead your main investments are made through your 401(k) and you don’t have a lot of free time, don’t force it. Keep a mid to long-term outlook in your trades and stay the heck away from the daily noise.

The other factor is the fear factor. What do you fear more; getting out of a trade too early and watching the trend continue without you, or staying in a trade that is going against you as you try to ride out smaller pullbacks? If getting out of a trade too early is your bigger fear, then you’re built for more of a mid-term approach. If staying in a trade that is moving against you sounds worse, then you have the mindset of a near-term trader.

Innately, a near-term approach is going to use tighter stop levels that will lead to exiting trades shortly after trouble arises. You might exit a trade before the trend officially ends, but you won’t be forced to sit through many drawdowns. Conversely, a mid-term approach is less twitchy. You won’t jump ship every time the market stalls for a few weeks, but you might get stuck sitting through prolonged pull backs that may eventually eat away all of your profits. One way or another, you have to decide what fits you best. You can’t just play it by ear. If you’re a mid-term trader but get mad every time you are in a trade that moves against you for a month, it’s going to be a short and stressful trading career for you. Don’t do it.

We seek to help both near and mid-term traders make the best trading decisions. Our daily analysis is geared towards the more active near-term trader; that’s why we will take more trades and use more aggressive stop levels. This newsletter is geared towards the less active mid-term trader. You don’t have or don’t want to spend your life stressing over market fluctuations. You want a concise look at only the best moves to make, which means fewer trades and more conservative stop levels. Decide what fits your personality best – considering both the time factor and fear factor – and go with it.