Think Like A Trader Blog

Monday, 5 October 2015

Intraday Trading Paired with Longer Term Trades

Reading Time - 4 Minutes

I mainly trade the five minute time frame, and my preferred market is the FTSE 100. However, I like to approach trading from two different angles. On the five minute time frame I'm always with the charts, evaluating positions, deciding on adjustments, altering position size. I do this full time.

But I also invest longer term. The way I look at it, my intraday trading (5 minute time frame on the FTSE 100) is my income. What I earn is how I live, pay for holidays, a new car, trips to the cinema...whatever it may be. Longer term investing - think Daily time frame and 4 hour time frame is what I consider 'wealth creation'.

I read about this method a long time ago and I think it's a great way to trade. Consider your longer term investments as something like a savings account. You let it accumulate and build your wealth over time. It's also great because it can be done by people who work full time. On the daily time frame, you're only checking your charts once per day. You can do it after dinner or before you set off for work in the morning. Trades can then be set with buy or sell orders which will automatically trigger you in if the markets behaves how you expected.

Nice, right? It's no more difficult than intraday trading. In fact, it's actually easier in my opinion. You don't get as many signals clearly, since each candlestick takes a full day to form, however there are a lot less false signals. If you align your trades with the overall trend of the market, you can get some excellent risk/reward trades which can run for weeks, sometimes even months, making you money whilst you sleep, whilst you work and whilst you play.

I found that focusing my effort on the lower time frames - when I started I traded the 1 minute, 5 minute and 15 minute before settling on the 5 minute as my preferred time frame - it made trading on the daily time frame easier. I could already spot great setups on the lower time frames and on the daily time frame I would have at least a full day to identify the setup, often times even longer.

If you enjoy trading the lower time frames then great. If you're good at it then even better. But it can be good to diversify. Never have all of your eggs in one basket, as they say!

I hope you have a great trading week!

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