Swing Trading Vs Day Trading

With the changing technology and extensive use of artificial intelligence day by day, the global marketplace has become more accessible than ever before. With the broker assistance and right kind of software, you can trade stocks, derivatives and currency easily. The investing style depends on the preference, goals and funds available with the investor. Some trader love hurried single-day trades whereas some keep their positions open for days. However, it is important to understand that day and swing trading both have specific benefits.

Both the trading techniques require concentration and perseverance. To generate good profits, an investor must possess financial competence (but this knowledge is more practical than theoretical).

The success depends upon the followings:

an optimal number of trades
adaptability to fluid market conditions
a consistent course of action

Due to its hurried nature, day trading requires the ability to stay calm and demands concentration. If the trader isn’t disciplined enough, swing trading may be more suitable. Though swing trading has a longer timeframe, it can still be stressful.

Key differences between swing and day trading. Let’s look at what they are:

Swing Trading

Identifying swings in stocks, currencies and commodities that take place over a period of days is the basis of Swing trading. It may take a few days to a few weeks to work out. Swing trading is less time-intensive and is usually practised on higher time frames than day trading.

Pros

Larger Target: The traders practising swing trading are not looking to make a small amount of gains rather they look to make one overall good trade. Thus, removes the overtrading risk.
Time: Swing trading typically requires two-three hours of trading in a day. The rest of the day is free.
Frequent market watch: Traders are not required to check the market frequently as they can check the market a couple of times a day or even a couple of times a week.
Low Risk: Opening fewer positions means you are less open to risk.

Cons

Patience: Swing trading can take weeks or even months before the trader can reach their target and close their position. Thus, impatient traders will struggle with this.
Overnight risk: There is a risk of leaving position open overnight
Swap fees: The broker may charge fees for this.
The risk from news events: This includes economic, political events and natural disasters which can wipe out a lot of profit.

Day Trading

Day trading, as the name is given, it comprises dozens of trades in a day on the basis of technical analysis and sophisticated charting systems. The traders practising day trading make a living from trading currencies, stock or commodities, by making small profits on a large number of trades and capping losses on unprofitable trades. In Day trading, traders typically do not keep any positions overnight.

Pros

No overnight risk: At the trading day’s end, day trader sold everything. A day trader can end the trading day without feeling pressured or worried.
Compounding of earnings much faster: The earnings made by the trader on the earlier day can be used the next day to make larger trades.
Less capital required: In comparison with swing trading it requires less capital contribution.
Feel more in control of your money.

Cons

Trading Strategy: Day traders are more likely to trade on emotion or on the opinion of others.
More commissions: Because the day traders trade more, they need to pay more brokerage or commission. These additional costs bring down the overall profit.
High pressure to get trades right. This pressure can affect the decision-making process of the trader.
Extra time: This requires a trader to devote his time in front of the screen. Not 3-4 hours but a whole day in front of the screen.

Summary

The main difference between Swing and Day trading is the time frame. The Day traders work with a short & limited time frame whereas the swing traders work with a much longer time frame. It depends on the temperament and lifestyle of the trader. If the trader is patient enough, swing trading is better, otherwise, day trading is better. A trader can try both swing and day trading.

To learn more about stock trading visit Angel Broking YouTube Channel