All traders must determine on which time frame to base their market analysis so that their estimates of market movements can coincide with the moment chosen to make an entry. A trader can trade looking to close trades daily, weekly or even for a month, depending on where in the market the desired target price is. However, regardless of the timing, we are looking for, it is important that we keep track of the market in both long and short term terms.
This time we are going to point out some of the most important strategies and recommendations for long-term investors, who should be very patient about the orders they place and cannot get carried away by second thoughts or panic once in the market.
Wyckoff strategy
For those who use Position trading (long-term trading), the best strategy is to determine the next price movements through analyzing the ranges of accumulation and distribution. Before and after an asset starts an upward or downward trend, its price will try to accumulate in different areas and then be distributed at different levels.
Generally, the sense of trends depends on multiple factors, of which one of the most important is the ability of price to break supports and resistances. If the price of an asset forcefully rejects a resistance level more than once and initiates a fall that breaks with some support, it is almost certain that a downtrend is about to start.
EMA Strategy
Some position traders prefer to use moving averages to make their decisions. If we use weekly charts, we can add an average of 40 periods for our entries, which is the typical 200 daily and followed by investors around the world.
If the price is above the average of 40, it is advisable to consider a bullish scenario and if the case is contrary, then it will adjust more to a bearish one. Although we are talking about long-term, we cannot forget that we are doing “Trading”, risk management is very important, so we must be very clear about where to position our stop loss since we must be comfortable when trading, even more than day traders.
A good location to place the stop loss should be below the moving average, and a good exit would be when the “closing” price loses the 40-week moving average.
Fibonacci retracement
Fibonacci retracement is a technical analysis term that refers to areas of support or resistance. The pullback level uses horizontal lines to highlight the areas of resistance or support that a trend must pass through before it can continue in its current direction. These levels are created by making a trend line between the low and high points of the chart
Fibonacci retracements usually work better in the long term. We must bear in mind that many times within the primary trend of a value there are (secondary) sub-trends. That is why tracing retracements in the very short term can lead to confusion since it can really be normal corrections in the long term as you are confusing them with main trends.
Many traders use these levels to identify strategic places to take a position or to place targets or benefits and stop losses. These levels are usually static, which is not the case with moving averages. This static nature leads to quick and simple identification, which allows operators to predict and react when testing a price level. Some kind of price action is expected at the turning points, be it a breakout or a rejection.
Levels are often used as a buy trigger during retracements in an uptrend. It is ideal to use momentum indicators, such as a MACD or a stochastic oscillator to identify the best entry points.
