What is the essential difference between short-term trading and long-term trading? When executing trades in the market, based on the size of the time frame we use and the different holding periods, trades can be divided into two types: short-term trading and long-term trading. Although both are referred to as trading, short-term trading is more inclined towards speculation, while long-term trading is more inclined towards investment, and there is an essential difference between the two.

When executing short-term trades, our analysis should focus on technical analysis, as the participants in the market within a short time are the same group of people. Those who participated in the market ten minutes ago are still participating ten minutes later, so the market sentiment in the short-term market has a strong coherence. At the same time, the fundamentals of the trading object will not change significantly in a short time, so the market will not be disturbed by external environments, which makes the credibility of technical analysis very high. The essence of technical analysis lies in identifying the dynamics of the forces of buyers and sellers in the market and changes in market sentiment, which is highly targeted in the short-term market.

When we execute long-term trades, the holding period is usually measured in days, weeks, or months. During the long holding period, market participants change continuously; some of those who paid attention to the market last month may have left the market this month, so market sentiment will not be as coherent as in the short-term market—thus, the role of technical analysis will be greatly reduced. Furthermore, as the holding period extends, the external economic environment will undergo significant changes, and these changes will gradually reflect in the market, becoming the main factors affecting the long-term market direction. Therefore, to gain an advantage in long-term trading, directly analyzing the trend of changes in the market environment (fundamental analysis) is more effective than analyzing changes in market sentiment (technical analysis).

It can be said that both technical analysis and fundamental analysis are important tools we use to analyze the market, but only by clearly distinguishing the appropriate circumstances for their use can we truly make our analysis effectively assist in trading. The essential difference between short-term trading and long-term trading is also an important watershed in distinguishing between technical analysis and fundamental analysis.