Are you the type of investor whose primary goal is to make a big profit in a short time frame? If so, then active trading is for you! Swing trading and day trading are two common types of active trading. Each trading strategy offers unique advantages and disadvantages, which makes knowing the difference before settling on a trading style vital. In this article, we will compare swing trading versus day trading to help you – the reader – decide the best trading technique to achieve your profit target!
What is long term trading?
This type of trading focuses on creating an extended trading plan. Swing trading takes place over days or weeks, not in a single day. Due to this extended time frame, swing trading has a higher potential for profit (when compared to day trading). Sporadic trading times allow the swing trader to enjoy a full time job because they do not need to constantly monitor their assets.
Although some swing traders trade full time, most swing traders consider their successful trading as a form of additional income, rather than the main form of income. Although the use of specialized trading software is not necessary for this trading method, it is recommended to use a service like Tickeron to identify options and patterns.
Benefits of swing trading
Swing trading is the best option for traders who do not want to devote their entire life to the stock market. Traders take days to weeks, the odds of profit are high, and you don’t need any special software for successful swing trading. In fact, your basic brokerage account will suffice! When comparing long-term versus day trading, swing trading generally does not require a large amount of upfront capital, making it an accessible option for a potential investor.
Disadvantages of swing trading
Since swing trades take place over long periods of time, traders will need some other form of additional income to keep the bills paid. This swing trading strategy relies heavily on maintaining a positive trading psychology.
Swing traders often use technical indicators to determine the best trading options, but even the best analyzes leave them exposed to risks overnight. Being able to stick to your initial swing trading strategy is the key to success. Although anyone can start long term trading, it is best to have at least a general understanding of fundamental analysis before getting started.
What is day trading?
The main difference between swing trading versus day trading is the holding period. While swing traders look for extended trading opportunities, day pattern traders avoid overnight risk entirely by completing trades during market hours. This type of trading is ideal for those who want to become a full time trader.
These retail traders base their entire lives around the stock market, placing day trading halfway between career and lifestyle! Although this type of trading is very risky and intense, there are many educational resources available to help new traders.
Benefits of day trading
Most day pattern traders enjoy the potential for profit (along with the high risk) that comes with this type of trading. Whereas another active trader may hold his assets for several days, a day trader operates over a much shorter period of time: one day, to be exact!
By making multiple trades throughout the day, a day trader can make many profitable trades within a short period of time. Being a day trader is equivalent to being self-employed, as it doesn’t require any formal training or degrees (although this can help). Instead, potential day traders simply need to raise enough capital to start making trades!
Cons of day trading
Becoming a day trader requires taking high risks. This trading style requires constant monitoring using fundamental analysis, which makes it best suited for more experienced traders. Since you are working in short periods of time – minutes or hours – there is no room for error. Just keeping track of your daily chart is not enough; You will need a dedicated trading software in order to become a successful day trader. This program can be quite expensive, but it is not the only ongoing expense. Transaction fees can increase quickly, reducing profits.
Swing trading vs day trading: which style is right for you?
For investors who want a trading experience that will keep them on the edge of their seats, it’s hard to match the excitement of day trading! The stakes are high, the profits are instant, and the market offers something new every day. On the other hand, swing trading is ideal for investors who want to hold 9 to 5 but are not interested in passive investing. This trading method provides more potential profit per trade than day trading, but also increases the overall risk.
So, swing trading vs day trading: which style is right for you? It totally depends on your schedule, available funds, and willingness to commit!