Introduction
Anyone who has ever tried trading the markets using a variety of different time frames will probably have discovered fairly quickly that it is a lot easier to trade the long-term charts (4-hour, daily, weekly, etc) rather than the short-term charts, such as the 1 and 5-minute charts, for example.
Indeed, this led me to create a forex trading strategy that was based entirely on the 4-hour and daily price charts, which I continued to successfully use for many years.
However if you are wondering whether it is easier to trade currencies or stocks using these long-term charts, I would say that stock trading is the clear winner.
The Benefits of Trading Stocks
If you focus your attention on finding good quality companies who continue to grow both their earnings and their dividends each year, you know that their share price should continue to rise year after year.
Subsequently, all you need to do to make money is successfully identify these top performing companies and buy their shares (or open a long position) when the opportunities arise.
These opportunities will often occur when the sector that the company belongs to falls out of favour with investors, or when the wider market falls dramatically and the stock price of every company falls as a result.
If the stock price falls, and the company is now undervalued on a fundamental basis, or if the share price has fallen sharply for no apparent reason and is now in heavily oversold territory according to your technical analysis on the daily or weekly charts, for instance, this is a time when serious profits can be made.
That’s because you will generally find that the long term trend will eventually prevail and the market will eventually value the company at a more realistic valuation.
The Drawbacks of Long-Term Forex Trading
The big problem that you have with forex trading is that you cannot say for certainty that a particular currency pair will continue rising (or continue falling) in the long run.
Yes there are certain influencing factors that can potentially drive the price of currencies upwards or downwards for a year or two, such as Brexit, for example, but even these are hard to predict with any real certainty.
Therefore you are essentially trading blind in many ways, unless you are a skilled economist who can analyse all of the fundamentals to make a firm prediction about the future direction of a particular currency, but even economists can get it completely wrong.
All you can really do is to analyse the long-term charts, such as the daily, weekly and monthly charts to make predictions about the future direction of a particular currency pair, and find high probability trading opportunities where the odds of success are firmly in your favour.
It is also worth mentioning that if you buy a good quality stock and take a long term view, you can afford to hold onto it for many years and ride out any market falls because you won’t incur any extra costs by doing so.
This is not so easy to do when taking a long-term position on a forex pair, however, because if the price falls, you may be faced with a margin call if you are using leverage, and have to pay more money just to keep your position open.
Final Thoughts
In my opinion, it is still a lot easier to make money from forex trading by trading off the 4-hour, daily and weekly charts rather than the short-term charts because you eliminate much of the random price movements that occur throughout the day, and have more predictable trends when they occur.
Plus you will also find that technical analysis works so much better on the longer-term charts and is far more reliable, particularly if you use fibonacci levels and well-defined areas of support and resistance because many other traders will be looking at the same support and resistance levels, and the price will often react accordingly.
The point I really want to make, however, is that it is even more profitable to trade stocks using these long-term charts if you just concentrate on trading the most profitable companies because you already know the direction of the long-term trend.
Subsequently, you just need to focus on getting your entry point right using technical analysis, and even if you do happen to buy in at the wrong time, you know that the long-term trend should eventually push the price higher than your entry price at some point.
Ultimately it is up to you to decide which markets you wish to trade and which time frames are the easiest to make money from. You might be one of those traders who is able to scalp the 1-minute charts and make lots of small profits throughout the day.
All I am saying is that I myself have found stock trading to be more profitable than forex trading when using daily and weekly charts, and that long-term trading is generally significantly easier than short-term trading, regardless of whether you are trading stocks or currencies.
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