Trader Risk Profiling and Position Analysis
limited trading capital that normally necessitates a much smaller stop size, which
is best located on the medium‐ or short‐term chart.use of Long‐term Charts Long‐term charts are again used primarily to con-
firm if the medium‐term entries are initiated in the direction of the prevailing or
larger trend, as trading in the direction of the larger trend is regarded as a less
risky and more advantageous venture.use of short‐term Charts The medium‐term trader may also prefer important
technical levels on short‐term charts to initiate new positions, add to or reduce
positions by scaling in or out, or to exit the market altogether. This affords the
medium‐term trader a finer level of participation in the markets, allowing for a
lower risk exposure when initiating breakout and reversal trades.
In summary, the medium‐term trader therefore refers to the short‐ or medium‐
term charts for significant technical levels to enter, add, reduce, or exit the market,
while referring to the long‐term chart for trend identification purposes.
Medium‐term traders may also look for:■ (^) Technical levels whereby potentially lower‐risk additions may be made to
existing positions, such as buying at significant support levels during a cor-
rection or reversal instead of buying on upside breakouts, which is less cost
effective
■ (^) Technical levels whereby a reduction in positions may be made, in a defensive
move, such as scaling out of some or all positions at the break of any signifi-
cant support, especially on the long‐term charts
■ (^) Technical levels whereby shorting is advantageous, especially at the break of
any significant support
26.3.3 the short‐term bullish or bearish trader
The shorter‐term trader normally resorts to using the short‐term charts for
initiating trades as most short‐term traders have very limited trading funds
and therefore cannot typically afford to place large stoplosses. They identify
and execute trades at the closest significant trigger levels, usually with fairly
tight stops.
use of Long‐ and Medium‐term Charts Long‐ and medium‐term charts are
used primarily to confirm if the short‐term entries are initiated in the direction
of the prevailing or larger trend. Short‐term traders may also identify significant
support and resistance levels on the long‐ and medium‐term charts to alert them
to any potential action points, for example, the breach of a significantly clear
and obvious long‐term trend line which was not visible on the short‐term chart.
Nonetheless, entries based on the breach of longer‐term support and resistance is
executed on the short‐term charts.
Summarizing, the short‐term trader therefore refers to the short‐term charts
for significant technical levels to enter, add, reduce, or exit the market, while