You Are Reading
What Is Swing Trading Vs Day Trading
Forex Trading

What Is Swing Trading Vs Day Trading


Since the target is larger, it will inherently have more risk from the longer holding time therefore the trader may adjust the size to a 400 share long position. In a bull or bear market, actively traded stocks do not exhibit the same up-and-down movements within a range as they do in more stable market conditions. Momentum will propel the market up or down for an extended period.

time frame charts trading lowers risk exposure of after-hours market news that can lead to opening gap downs. Those types of gains might not seem to be the life-changing rewards typically sought in the stock market, but this is where the time factor comes in. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money. Are you easily affected by stress, can’t handle looking at screens all day, and prefer to grasp the bigger picture?

They are under much less of a time crunch and don’t need to react within seconds of a price change. For example, if you’re swing trading off a daily chart, you could find new trades and update orders on current positions in about 45 minutes per night. Swing trading is a strategy that involves making trades over the course of more than a few days, weeks, or months. The goal is to capture short- to medium-term profits as trends change in a market.

Key Difference

The key difference between swing trading vs day trading is the holding period. Whereas swing traders look for extended trading opportunities, pattern day traders avoid overnight risk entirely by completing trades within market hours. This form of trading is ideal for those who want to become a full-time trader. Day traders and swing traders both pursue short-term gains by using technical analysis.

But, while they both operate on the same principles of making from short-term stock movements, the two strategies differ in some key ways. Both day traders and swing traders rely heavily on technical analysis to analyze and trade their markets. That’s because the effects of market fundamentals (or the underlying “economics” of a given market) can be slow to appear. Day trading requires the full attention of the investor to be successful.


Swing trades aim to capitalize on buying and selling the interim lows and highs within a larger overall trend. A day trader has to be extremely precise when setting his stop loss. He also has to stay disciplined as he can’t afford to open positions on a whim. Due to the higher frequency of trades, he is more likely to face losses and is likely to decimate his portfolio in the span of 24-hours. Day trading is popular among forex traders, especially those trading fiat currencies. Because of their low volatility, fiat currencies are more likely to form ranges.

A bad trade, or string of bad trades, can blow up your account, where the loss to the portfolio is so great the chances of recovery are slim. For a swing trader, a string of losses or a big loss can still have a dramatic effect, but the lower leverage reduces the likelihood that the results wipe out your portfolio. Day traders’ shorter time frame means they don’t generally hold positions overnight.

It is also worth pointing out that is the lifeblood of day trading. At times, volatility represents the focal point of one’s trading session. Day traders trade on smaller time frames and hold a trade for as little as a few minutes or as long as several hours at most. Alternatively, swing trading offers a wider audience the opportunity to profit from market fluctuations, due to the method’s lack of time and equipment requirements, as opposed to day trading. On the other hand, since swing traders keep their positions open for longer periods of time, there’s a high probability of earning more pips from the market . Swing traders are exposed to systemic risks since their trades remain open for days or even weeks.

What Are the “Swings” in Swing Trading?

Here you can find our archive with all our swing trading articles. Value investing vs growth investing, many times the verdict will come down to personal preference and industry knowledge. However, that doesn’t mean each strategy comes without its own benefits and drawbacks. Sign up for Market Minutes to receive powerful market analysis, top trade ideas, & helpful blog updates.

She is a library professional, transcriptionist, editor, and fact-checker. The offers that appear in this table are from partnerships from which Investopedia receives compensation. Investopedia does not include all offers available in the marketplace. Investopedia requires writers to use primary sources to support their work.

Day traders don’t leave their positions open overnight, so they don’t pay overnight funding charges. But, they will need to pay close attention to the markets and should take steps to manage their exposure to risk in case the market moves against them. Traders use technical indicators to determine if specific stocks possess momentum and the best time to buy or sell. To exploit the opportunities, the traders must act quickly to increase their chances of making a profit in the short-term. If the market looks as if it wants to fall, the trader will not hesitate to short. Alternatively, she will not oppose opening a long if the market looks as if it has bottomed out.

Day Trading vs. Swing Trading Comparative Table

This software can be very expensive, but it’s not the only ongoing expense. The goal of swing trading is to identify the trend and capture the trend for gain. Unlike day trading, swing trading is done overnight or holds for several weeks. Swing trading uses technical analysis of the stocks for short-term price movement prediction. Some traders also use intrinsic value or fundamentals of the stocks in addition to technical analysis.

  • If you’re interested in trying your hand at either of these short-term trading styles, start small and move cautiously.
  • In essence, their trading outcome and reward/risk ratio cannot be the same as those of swing traders.
  • Technical analysis involves looking at market statistics and historical price charts overlaid with technical indicators or oscillators.
  • By understanding the underlying risk, swing trades are usually done on a small position size than day trading.

This is a stark contrast to day trading, where users try to fit their position at lower time frames in hopes that a macro market movement does not obliterate their hypothesis. With the help of technical analysis, the trader analyzes the chart and spots several strong support levels at HTFs. In this case, zones such as $42k, $35k, and $29k have historically held well and are likely to do so in the future. For the trader, these targets represent price levels suitable for closing the short and swinging back into a long position.

Some professionals day trade in the futures markets, looking for short-term price movement in stock indexes such as the S&P 500 or Nasdaq, or commodities such as gold or crude oil. In recent years, crypto markets have become a favorite of day traders. Swing traders primarily use technical analysis, due to the short-term nature of the trades.

As with moving averages, swing traders often use crossings or “breaks” in support or resistance levels as sell or buy signals. Swing trading can be a means to supplement or enhance a longer-term investment strategy. Swing trading is one of the few ways traders attempt to capture frequent short-term price movements in a market landscape that tends to evolve at a much slower pace.

Advantages and Disadvantages of Swing Trading

If you are passionate about the stock market and want to be fully immersed in the day to day action, then day trading might be right up your alley. Swing trading is the art of recognising and capturing price swings across asset classes and having the patience to hold them for days or even weeks. We will explore the differences between day trading and swing trading in this article.

When it comes to swing trading, the approach should be rather straightforward. Observe an already-established market and then anticipate price pullbacks within the crypto market’s cycles. Here, your focus should be on price points in the market at which a reversal is more likely, and you open or close your trades within these price ranges. For example, in an uptrend, you intend to buy from these price lows and close the trade at the swing high. When the general trend is bearish, you short the market when the prices are high and close the trade at the swing low. These retail traders base their entire lives around the stock market, placing day trading halfway between a career and a lifestyle!

In this article, we will provide you with a detailed explanation of how each trading strategy works and its disadvantages. In the end, we will also provide you with insight into which style works best for you. Inflation can have a big impact on the stock market, leaving unprepared investors in for a bumpy ride.

Leave a Reply

Your email address will not be published. Required fields are marked *