Day traders and swing traders are usually considered active traders.
Both seek short-term price moves, not long-term gains. However their tactics and approach to trading is very different from one another. Here are the day trading vs. swing trading pros/cons.
Overview
- Day trading involves making several transactions utilizing technical analysis and charting.
- Day traders must make more deals and close all positions by market closing.
- Swing trading involves day- or week-long stock, commodity, and currency movements.
- Swing trade positions can yield higher gains (or losses) over time compared to day trading.
- Traders should adopt a strategy that matches their skill, inclinations, and lifestyle.
Day Trading
Day trading involves holding a position open for less than a day. Depending on market conditions and trading style, day trading can involves dozens of trades in a single day.
Day traders use technical analysis and sophisticated charting algorithms to discover trading trends and enter and exit opportunities.
Day traders make a living by making small returns on numerous trades and capping losses on unprofitable trades. Day traders don't hold positions or stocks overnight.
Day trading involves holding a position open for less than a day. Depending on market conditions and trading style, day trading can involves dozens of trades in a single day.
Day traders use technical analysis and sophisticated charting algorithms to discover trading trends and enter and exit opportunities.
Day traders make a living by making small returns on numerous trades and capping losses on unprofitable trades. Day traders don't hold positions or stocks overnight.
Day Trading Pros
Day trading is unlike other investments. This fast-paced, adrenaline-inducing approach to financial markets isn't for everyone. Day trading is more than the pursuit of riches; it's a fascinating, high-risk lifestyle.
Day traders are self-employed. Any investor with adequate personal wealth can trade when they wish, as flexible as global markets allow.
Many finance careers require the proper degree from the relevant university even to just get an interview with a trading firm or institution. Day trading requires no Ivy League education and there are no formal schooling requirements for day trading.
However, deep understanding of technical analysis, financial markets and correct risk/money management are needed in order to succeed.
Day Trading Cons
SEC, the US Security and Exchange Commission states that "Day traders often incur large financial losses in their first months of trading, and many never become profitable."
While the SEC warns day traders to only risk money they can afford to lose, many sustain enormous losses on borrowed money, either from margined trades or family or other sources.
Day trading setups can be costly. High-frequency traders, hedge funds, and other market professionals spend millions to acquire trading advantages. A day trader needs a trading platform, charting software, and strong computers to compete.
Day trading costs tend to be high and be negatively affected by they higher-than-average transaction fees due to trade volume. Day traders may face continuous costs for real-time price quotes and commissions, which can pile up according to volume of trading activity.
Day trading needs to be pay close attention to their positions. Day traders usually quit their jobs to trade full-time. A day trader must be vigilant during market hours because their positions might easily become unprofitable.
SEC, the US Security and Exchange Commission states that "Day traders often incur large financial losses in their first months of trading, and many never become profitable."
While the SEC warns day traders to only risk money they can afford to lose, many sustain enormous losses on borrowed money, either from margined trades or family or other sources.
Day trading setups can be costly. High-frequency traders, hedge funds, and other market professionals spend millions to acquire trading advantages. A day trader needs a trading platform, charting software, and strong computers to compete.
Day trading costs tend to be high and be negatively affected by they higher-than-average transaction fees due to trade volume. Day traders may face continuous costs for real-time price quotes and commissions, which can pile up according to volume of trading activity.
Day trading needs to be pay close attention to their positions. Day traders usually quit their jobs to trade full-time. A day trader must be vigilant during market hours because their positions might easily become unprofitable.
Swing Trading
Swing trading identifies daily swings in stocks, commodities, and currencies. A swing trade might take days to weeks to develop and be profitable. Typically, a swing trader isn't likely to make trading a full-time career, however it is possible.
Swing Trading Pros
Swing trading is for everyone with knowledge and capital. Swing traders don't need to be glued to their computer screens all day because their trades have a longer time horizon (days and weeks) when compared to day trades (minutes and hours). They can keep working at their full-time job.
Swing traders can take advantage of stop-losses in order to protect their capital. Day traders can too, but not as easily and effectively as for swing trading, due to day trades high volatility and price fluctuations. While a stop may be executed at an adverse price, it beats day trading's ongoing monitoring of open positions. Swing trading can be partly automated if you know your positions in advance, set proper orders, and have confidence in the execution.
Swing trading requires less initial capital. One computer and standard trading equipment is more than enough. Assuming that the trade moves in the predicted direction, the longer a swing trader maintains a position, the bigger the price movement and return possibilities compared to day trading. A swing trade that is held for longer than a month but for less than a year is considered a position trading.
Swing Trading Cons
Swing trades take time. While your position is open, shifting market conditions may make the trade ineffective. Your capital is also tied up in a single position for a longer time; you must be willing to be illiquid until the right time to exit.
Holding your position overnight or longer may increase your losses if markets move against your predictions.
Swing trading is quieter, and often times, less exciting than day trading. Swing trading involves less attention and personal engagement, thus it's less engaging. Swing trading is slower, more systematic, and more dull than fast-paced trends and price movement.
Day Trading and Swing Trading Comparisons
Day and swing trading have pros and cons. Neither technique is superior; traders should choose the one that fits their skill, inclinations, and lifestyle.
Day trading suits full-time traders with decisiveness, discipline, and diligence. Swing trades are a good strategy to set positions that don't need constant monitoring, execute fewer trades, and have some steady returns.
Day traders work in a fast-paced, exciting environment to capture short-term price movement. A day trader exits positions by the end of the trading day, executes a large volume of trades, and tries to profit through smaller trades.
Swing traders use technical analysis to initiate and exit positions. Swing traders maintain positions for multiple days to produce more profit with fewer trades.
Day traders need a trading platform, charting software, and a powerful computer. Day traders use subscriptions and live pricing tools to capitalize on slight price swings.
Day trading and swing trading are short-term investing strategies. Day trading is more exciting, risky, and attention-demanding. Otherwise, swing trading may be better.
Day and swing trading have pros and cons. Neither technique is superior; traders should choose the one that fits their skill, inclinations, and lifestyle.
Day trading suits full-time traders with decisiveness, discipline, and diligence. Swing trades are a good strategy to set positions that don't need constant monitoring, execute fewer trades, and have some steady returns.
Day traders work in a fast-paced, exciting environment to capture short-term price movement. A day trader exits positions by the end of the trading day, executes a large volume of trades, and tries to profit through smaller trades.
Swing traders use technical analysis to initiate and exit positions. Swing traders maintain positions for multiple days to produce more profit with fewer trades.
Day traders need a trading platform, charting software, and a powerful computer. Day traders use subscriptions and live pricing tools to capitalize on slight price swings.
Day trading and swing trading are short-term investing strategies. Day trading is more exciting, risky, and attention-demanding. Otherwise, swing trading may be better.
Summary
Day trading needs excellent technical trading and charting skills. Day trading is stressful, therefore traders must remain calm and in control. Day trading is risky; traders can occasionally lose everything.
Swing trading requires fewer skills. Swing trading is a realistic alternative for traders who wish to keep their full-time careers but still dabble in the markets. Swing traders should use fundamental and technical analysis, not just technical.