Day Trading vs Swing Trading: Which One of These Two Active Trading Styles Is Right for You?

Day Trading vs Swing Trading: Which One of These Two Active Trading Styles Is Right for You?

Reading time: 7 minutes

Which trading style (and trading strategy) one elects to follow is an important step in the development of a professional trader. There are four primary trading styles, each of which possesses different holding periods and, therefore, attracts different types of traders. Day trading and swing trading are two popular trading styles that are often employed, whether in the Forex market, the stock market or any type of financial instrument traded. 

Day traders typically open and close 1-3 trading positions on the same day, thus targeting short-term intraday price movement; swing traders, on the other hand, may hold their positions open for several days or weeks, thus targeting more of a medium-term approach. In addition to day trading and swing trading, scalping represents another active short-term trading style that involves the execution of multiple trading positions per day, while at the longer end of the spectrum, we have position trading: an investment-style approach whereby the trader maintains open positions for months (if not years) at a time.

Key Differences: Day Trading vs. Swing Trading

  • The first and most apparent distinguishing characteristic between day trading and swing trading is the holding period. Day traders are done by the end of their trading day: this tends to be the end of their respective trading session (think the London session or New York session, for example), and, as a result, a day trader is not susceptible to overnight risk. A swing trader has no set time to end their trades as they target more medium-term price action. As highlighted above, a trade may be active for days, weeks and even sometimes months. 
  • Importantly, unlike day traders who usually execute only a handful of trading positions in a trading day, the swing trader is less active and executes fewer trades: may only open 1 or 2 trading positions per week (or even a month). What you may also find is that a trade executed as a day trade could merge into a swing trade, depending on the trader’s trading strategy’s rules of engagement. A similar approach might unfold whereby a swing trader’s open position adapts into a longer-term position trade. Again, though, this is entirely trader-dependent. 
  • Regarding the capital required to be a day trader or swing trader, this is a difficult one to answer, void of knowing the trader’s personality, personal situation and long-term objectives. As a swing trader, you may find that you require a larger account size to withstand overnight risk, which is something day traders seldom face. Swap fees are also an issue for swing traders, given the overnight exposure.
  • Time at the screen is another key observation that differentiates day trading and swing trading. As you can imagine, a day trader usually must be at their trading desk for more hours in a day than a swing trader. For those with full-time obligations, therefore, swing trading (and position trading) is where many traders venture towards, while for those with more time on their hands and those who are comfortable being at their desks for hours each day, day trading could be a path worth exploring.
  • Day traders tend to adopt technical analysis as their primary vehicle for assessing the financial markets. Swing traders also employ technical analysis but also often include fundamental analysis. 
  • One final point worth highlighting is a trader’s experience level: the ability to select precise entry points can be an issue for day traders. Swing trades entertain larger trading positions (that is, the distance from entry to exit), allowing the trader some flexibility around a trader’s entry and exit prices. This also means slippage (the difference between the expected execution price and the received price) is rarely an issue for swing traders. For a day trader, a trading position usually has tighter protective stop-loss orders and requires a more precise entry. Hence, it can be said that to day trade successfully, beginner traders might struggle without sufficient experience. 

Which Trading Style Is Right for You?

Choosing whether to venture into short-term day trading or more medium-term swing trading will ultimately depend on you. The points highlighted above should provide some basic guidance to help make this decision. Ultimately, though, things like your current lifestyle, your risk tolerance, financial goals, experience level and account size will affect which trading style you choose.

If you are a quick thinker and can handle the stress of short-term price movement, then day trading may be a good option. Yet, if you favour a slower pace of trading where you may only need to check in at your trading desk a couple of times per day, swing trading may be a better choice. While some say you need to be more patient the longer the timeframe (swing trading and position trading, for instance), patience is necessary for both short-term active trading and medium- to longer-term trading.

If you are not sure which trading style is right for you, it is a good idea to start with a demo trading account. This will allow you to test both trading strategies and trading styles in real time without risking live funds.

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