Ask Colin

What is the meaning of the trap you mention of investing medium to long term and monitoring the market short term?

Trends exist in all time frames. So, there are trends within a day, within a week, within a month and so on. They do not last precise periods, though, which makes them very tricky.

If you are a medium to long term investor, you should be trying to capture trends that stand out as important on monthly and weekly charts. If you invest in one of these and then start looking closely at daily and, even worse, intra-day charts, you will be seeing trends that are very short term and only make up fluctuations in the big trends you have invested to ride.

So, if you make a decision to buy on the basis of a trend on a weekly or monthly chart, it is best to monitor the trend on those charts also. If you must look at the short-term picture, always do so in the context of the big trend you are trying to catch.

This is best done by always beginning your analysis with the monthly chart, then moving to the weekly chart and finally to the daily chart.

If you use indicators, always calculate them on weekly or monthly data, not daily.

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