Divorcing Time Frames

Knowing our time in the market can greatly assist us as traders in our timing of the market. One of the errors that traders compound is working off of two different time frames. This can result in unnecessary conflict as the emerging emotions of one time period may supersede the disciplined required on another. Recently I underwent this experience when a longer term holding period was pressured on a shorter term time frame and I sold the position only to watch it rebound to new highs. I allowed a shorter term time horizon bearishness to override the a plan that thus far kept me pat for 3 months.

If you are a short-term trader, recognize that selling a stock for a quick profit only to watch it go on to double in price is of no real concern to you. You operate in a particular zone of a stock’s price continuum, and someone else may operate in a totally different area of the curve. However, if you’re a longer-term investor, there will be many times when you make a decent short-term gain only to give it all back in the pursuit of a larger move.  --Mark Minervini

Over time traders begin to develop default behaviorism arising from experience and intuition. One of the things to be cautious of is that the default capital preservation of a system devised for a shorter time time frame of 5 days can override a longer time horizon system which can in turn become an exceptional costly mistake. The longer capital is tied up in a position the more crucial it is that this position be allowed an opportunity for an outsized gain on this horizon.