Timely Time Frames

Disclaimer: I have written this post from the perspective of a retail investor with an interest in technical analysis. It seeks to encourage thought, and self-criticism, about how investment results might be improved. I am not a professional financial adviser, and my comments should not be relied upon in making investment decisions.

Time-frames according to Trader/Investor Preference

I have occasionally been asked what are the time frames in which I trade, or invest. I’m never quite sure how to respond. As a retiree I am a modest investor, seeking to make my and my wife’s savings last until we transition to a new time frame ourselves, or is it to oblivion? I don’t think I can dignify myself with the title of trader. After 15 years retirement, my limited capital is jealously guarded, and would scarcely entice a top-notch financial adviser to court my patronage.

It is a question that implies that it is wise to specialize in a particular time-frame that suits one’s aptitudes, or that is perhaps more lucrative than others. Then there is the question of risk. Time in the market does not necessarily equate into proportional profitability. The longer the time in the market, the greater the risk of losing not increasing capital, particularly if geared.

I usually explain that my approach has rejected day trading in which positions taken are closed before the market does, as being too difficult, with competition from professionals such as market makers and institutional scalpers.  Of course there are many successful retail day-traders who have the discipline to cut short their losses, and let their profits run. I’m not one of them.

A Buy and hold strategy risks coughing up market gains, and being trapped in market down-turns.

For me it is a time-frame somewhere between these two extremes. My time frame is flexible, reflecting performance, or under-performance, from short-term to long-term.

Time-frame selection tailored according to the class of the security

I have come to consider, however, that there may be “horses for courses”.  Thinking in generalities, there may be some securities that lend themselves to being traded in one term, rather than another. If so this may aid the investor to plan a suitable strategy in advance. To some extent this is self-evident and investors may without thinking already tend to do this.

I will try to illustrate my thinking by suggesting a few options with which readers may or may not agree, but which could yield more profit than a haphazard approach to time-frame; bearing in mind the need for fine-tuning of investment positions with technical analysis.

  1. For IPOs and very volatile stocks, – day or very short-term trading.
  2. For highly speculative securities and commodities – day or very short-term trading. Enter on a break-out with volume. Sell when there is a reasonable profit, or if there is TA evidence of a change in trend. Do not be greedy, and hang on too long.
  3. For Emerging Mid-cap stocks with positive prospects. Invest for the medium-term to allow time for corporate initiatives to play out.
  4. Blue-chip industrial type stocks paying steadily increasing dividends. Invest for the long-term, but keep in mind guidelines to sell to limit losses.
  5. Mining, and other cyclical stocks. The emphasis should be on riding out primary trends in a medium to long-term.
  6. Turn-around stocks. The turn-around of out-of favour stocks is likely to be problematic and protracted. Investments should be in proportion to the risk, but a medium-term time-frame may be required for restructuring initiatives to work.
  7. Take-over targets. It is seldom worth taking positions in companies just on take-over speculation. Unless there are likely to be regulatory issues, buy into a target company after an announcement. The rationale: there is likely to be a  higher offer(s). Look especially for all-cash offers. Invest for a medium-term.

 



Categories: Investment, Trading opinion

Tags: , , , , ,

2 replies

  1. Great Commentary Ken – a really insightful and interesting read and one all part time investors should spend time digesting. Many Thanks. Erik Metanomski

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