Day Trading versus Swing Trading. Which style fits you best?

Various trading styles exist. You might want to know them all. It will help you to make a decision which one you like, which one suits your needs and also which one brings you the most gains. Today, I will talk about two styles and the differences between them. They will be day trading and swing trading.

Day trading versus swing trading

Both methods of trading are similar in a way, but there are a few essential differences. Let’s discuss trading frequency, the number of trades taken, time horizons, the time you will need to dedicate to it and how you can trade with them.

Main differences between day trading and swing trading

Frequency

Day trading is based on the opening and closing of multiple transactions during the day.

Swing traders open multiple transactions during a week because they often keep one position open for several days, weeks or months even.

Number of trades taken

Day traders usually open more transactions. They focus on a day as a whole, so they buy and sell many times in the same day. They look for a fast profit. Oftentimes it is suggested not to invest larger amounts than 1% of your overall capital in a single transaction. With a reward-to-risk ratio of 2:1, it can still bring you profit without taking too much risk.

Swing traders open fewer transactions over days or weeks. This means the gains and losses come slower. Still, it is possible to get results faster for some of your trades.

Time horizon

Short time horizons are typical for day trading. Everything happens in one day. Traders accumulate small profits made on daily changes in the prices.

Positions opened in swing trading have long time horizons. They stay opened through days, weeks, or months to earn profits on market changes.

Time dedicated

Every type of trading requires your attention and time. However, generally speaking, day trading consumes more time during your day. You must prepare the chart, set the indicators, read economic news and so on. Plus the time spent on buying and selling securities. It means, on average, 3 to 4 hours in front of the computer.

Swing trading requires less active time because the positions are often opened for a longer time. So you enter the trade and then just making updates or looking for new opportunities of course.

How to trade

Both, day traders and swing traders, have to open an account with a broker. Then, with the help of a computer with a good internet connection, they will be able to trade. The difference is that day traders need to possess the most up-to-date software. The prices may change very rapidly and so some automation is beneficial.

What type of trading you should choose

There are several factors you should take into notice when deciding between day and swing trading.

The first one is your availability. Day trading is more time-consuming. Swing trading gives you more freedom.

The pace of day trading is much faster. You will open various transactions throughout the day and it requires your focus all the time. Positions opened while swing trading last longer and so they do not need so much attention.

Also, estimate the amount of stress you can take. Typically, with rapid changes and constant focus, day trading is considered to be more stressful.

Whatever your choice will be, remember that you have to invest quite a lot of time in preparations. You need to get the necessary knowledge about the platform, financial instruments, indicators. Then, you should develop a trading strategy and prove its worth by testing it multiple times in various market scenarios.

Numerous brokers offer demo accounts for free. This is a place where without risking your own money, you can practice new approaches.

Conclusion

In the end, it is always an individual decision about which one to choose. No one can say this is better than the other one. However, it can be better for this particular trader.

Learn about different types of trading, try them on a demo account and find out what fits you best.

Generally, day trading has more profit potential as the trades happen more frequently. It is also more active, time-consuming, and stressful than swing trading which still has plenty of profit potential.

Capital requirements depend on different markets and trading styles. You should check with your broker if there is a minimum amount to begin with.

What are your preferences? Did this article take you any closer to the decision of which type of trading to choose? Tell us in the comments section below.

Wish you good trading decisions!