Day trading and swing trading: what is the difference?

Day trading and swing trading: an overview

Active traders usually divide themselves into two camps: day traders and swing traders. Both seek to profit from short-term stock movements (as opposed to long-term investments), but which trading strategy is better? The following are the advantages and disadvantages of day trading and swing trading.

Key points

  • Intraday trading involves the use of technical analysis and charting systems to conduct multiple transactions in a day.
  • Swing trading is based on the volatility of stocks, commodities, and currencies that occur over several days or weeks.
  • Traders should choose strategies that complement their skills, preferences and lifestyle.

Day trading

As the name suggests, day trading involves dozens of transactions in a day based on technical analysis and complex charting systems. The goal of day traders is to make a living by trading stocks, commodities or currencies, by making small profits in large numbers of transactions and limiting losses in unprofitable transactions. Day traders usually do not maintain any positions or own any securities overnight.

The biggest temptation of intraday trading is the huge profit potential. But this may only be possible with rare individuals who have all the necessary characteristics (discipline, discipline and diligence) required to be a successful day trader.

The US Securities and Exchange Commission (SEC) pointed out that “day traders usually suffer severe financial losses in the first few months of trading, and many people never reach profitability.”Although the US Securities and Exchange Commission warned that day traders should only bear the risk of loss they can afford, the reality is that many day traders suffer from the borrowed funds through margin trading or funds borrowed from family members or other sources. huge loss. These losses may not only shorten their day trading careers, but also put them on huge debts.

  • Day traders work independently and are not affected by the whimsical ideas of the company’s bigwigs. They can have a flexible work schedule, take vacations when needed, and work at their own pace, which is different from the people on the company’s treadmill.
  • Day traders must compete with high-frequency traders, hedge funds, and other market professionals who spend millions of dollars to gain a trading advantage. In this environment, day traders have no choice but to spend a lot of money on trading platforms, charting software, state-of-the-art computers, etc. Continuous costs include the cost of obtaining real-time quotes and commission fees that may accumulate due to transaction volume.
  • Long-term day traders like the thrill of fighting the market and other professionals day after day. Not many traders will admit the adrenaline surge brought by fast trading, but this is an important factor in their decision to make a living by day trading. It is doubtful whether such people will be satisfied with selling small parts all day long or studying the numbers carefully in the office cubicle.
  • To truly do this, day traders must quit their daily work and give up a stable monthly salary. Since then, day traders must rely solely on their skills and efforts to generate enough profits to pay their bills and enjoy a decent lifestyle.
  • Intraday trading is under great pressure, because you need to observe multiple screens to discover trading opportunities, and then act quickly to take advantage. This must be done day after day, and the requirement for such a high degree of concentration and concentration often leads to burnout.
  • For many jobs in the financial field, getting the right degree from the right university is only a prerequisite for an interview. In contrast, day trading does not require the expensive education of an Ivy League school. Although there are no formal educational requirements to become a day trader, technical analysis and computerized trading courses can be very helpful.

Intraday trading involves a very unique skill that can be difficult to master.Investment encyclopedia Become a day trader The course provides an in-depth overview of intraday trading and is accompanied by more than five hours of on-demand video. In the course, you will learn everything from order types to technical analysis techniques to maximize your risk-adjusted returns.

Swing trading

Swing trading is based on identifying fluctuations in stocks, commodities, and currencies within a few days. Swing trading may take several days to several weeks to complete.Unlike day traders, swing traders are unlikely to trade as a full-time career, although traders may choose to become day traders and Swing traders.

Anyone with knowledge and investment capital can try swing trading. Due to the long time frame (from a few days to a few weeks, not a few minutes to a few hours), swing traders do not need to stare at the computer screen all day. They can even maintain a separate full-time job (as long as they are not checking the transaction screen all the time at work).

  • Transactions usually take time to resolve. Keeping an asset’s trading open for several days or weeks may bring higher profits than entering and exiting the same security multiple times a day.
  • Since swing trading usually involves positions held at least overnight, margin requirements are higher. The maximum leverage is usually twice a person’s capital. Compare this to day trading where the margin is four times the principal.
  • Swing traders can set stop losses. Although there is a risk of executing a stop loss at an unfavorable price, it surpasses the continuous monitoring of all open positions, which is a feature of day trading.
  • As with any trading style, swing trading can also cause significant losses. Since swing traders hold positions longer than day traders, they also risk greater losses.
  • Since swing trading is rarely a full-time job, it is much less likely to be exhausted due to stress. Swing traders usually have a fixed job or other source of income from which they can offset or mitigate trading losses.
  • Just use a computer and traditional trading tools to complete swing trading. It does not require the most advanced day trading technology.

Main difference

Day trading and swing trading have their own advantages and disadvantages. Neither strategy is better than the other, and traders should choose the method that best suits their skills, preferences and lifestyle. Day trading is more suitable for individuals who are keen on full-time trading and have three “Ds”: dRigor, dDiscipline, and diligence (a prerequisite for successful day trading).

Day trading

  • Multiple transactions per day

  • The position lasts from several hours to several days

  • full time job

  • Use short-term buy and sell signals

  • Rely on the most advanced trading platforms and tools

  • Multiple smaller gains or losses

Swing trading

  • Several transactions per week

  • The position lasts from several days to several weeks

  • part time

  • Use trend and momentum indicators

  • Can be done through a standard brokerage account

  • Fewer but more substantial gains or losses

The success of intraday trading also requires an in-depth understanding of technical trading and charts. Due to the intense and nervous day trading, traders should be able to remain calm and control their emotions. Finally, intraday trading involves risks-traders should be prepared to sometimes leave with 100% losses.

On the other hand, swing trading does not require such powerful features. Since anyone with a certain amount of investment capital can perform swing trading and does not require full-time attention, this is a viable option for traders who want to keep a full-time job but also get involved in the market. Swing traders should also be able to apply a combination of fundamental and technical analysis, rather than technical analysis alone.


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