How will you determine the holding period?
In practice, the investors hold a position until it is promising. But a trader should form a clear vision even before entering a trade. He should know what kind of behavior will influence the holding of a deal. Having a trading plan is very important in deciding it. You have to decide earlier whether you should close the deal if the transaction is not realized, in a particular time. And also, if the potential is reached before expected, decide about holding the position further.
Scalping involves only short impulse trades. The holding period is no more than a few minutes. In scalping trades are closed regardless of the result. Holding a position for more time may increase the risks of losses.
The position is not held for a very short time as in scalping. Usually, the preference is 2-3 hours. Sometimes, the position is held for a whole day. Intraday traders don’t wait and tend to take profits quickly if certain conditions are absent. Before entering a position a trader estimates the profit he could earn. Also, traders have to assess the level of acceptable risk. It forms a guideline for the holding time of the transactions. As a rule, the traders want to cut their losses quickly and grow their profits.
In swing trading, traders hold positions from one to several days. Traders prefer background information and news for the analysis. Regular observations and statistics help to form ideas about the transactions. A trader can’t follow his predictions strictly. Traders lose by exiting too early or dragging a losing deal.
Generally, traders keep positions for weeks or for several months. A large chunk of traders prefers medium-term trading. Usually, the long duration of holding makes it difficult to form a detailed trading plan. Emotional factors also play a role as holding time is longer. In the case of uncertainties, traders tend to make hasty decisions.
The holding position may run even for a year in this case. For long-term holding, the traders mostly rely on fundamental analysis. And holding the position mostly relies on the investor’s idea about using the funds. The traders can hold the positions until the fundamental idea of the instrument is relevant.
Determining the period of holding a position depends more on personal plans. It depends on how soon a trader wants to get returns and what style they follow. So, a trader has to decide the holding position according to the trading style he follows. Know to hold our positions for the right time and make progress.