Many people invest with the intention of trading stocks. It can be a very lucrative venture, especially with the market as volatile as it has been in recent years. There are different types of trading; swing trading and day trading being the most common. Let’s find out which is better and who is who…
Swing trading involves keeping a small number of stocks on hand and trading them frequently throughout the day and over the course of several days. This type of trading is not for the faint of heart. It requires much planning, discipline, and patience. The goal of swing trading is to buy low and sell high. You try to let your profits run while you sit on your hands until you see an opportunity to buy again (or sell). Swing trading is usually done in whole stock increments.
The benefits of swing trading are obvious. But the risks are also great. If your timing is off, you could lose everything; or you could win big and then miss the next move. Many investors have lost thousands by following this strategy.
Day traders seek to make money by buying and selling markets within a short period of time, typically overnight (depending on the market hours). It takes very little planning for someone to open up a web-based brokerage account that allows day trading. That person goes shopping for stocks based on emotions, personal knowledge, or research he/she may have done in advance. They buy or sell a stock at the first opportunity. They may often change their mind and move quickly back to their trading arena, only to go back in again when they have time to think about it more. Since these people are not looking for capital gains, but rather for quick profits – there are very few risks for going fast.
Day traders like the ones on Wall Street are easy to spot: They tend to be young and male. They work around the clock and try to be everywhere at once. Their actions may vary from day-to-day swing traders who buy low and sell high, or those who chase a hot stock only to find it has cooled off when they get there. Day trading is often very much a solo sport.
The rewards are great for someone who can make it work consistently, but the losses are also great. Most of the traders lose money on a more regular basis than they win. Day trading is considered to be one of the riskiest ways to invest because you could lose your entire investment in just a few hours.
Differences between swing trading and day trading
1) Day trading involves more risk than swing trading.
2) Day trading is about buying or selling a stock or a number of stocks that are typically traded on public stock exchanges within one day. Swing trading involves buying and selling stocks over several days, weeks, months, or years.
3) Day traders generally buy and sell stocks within the same month while swing traders are more likely to hold onto their positions for longer periods of time.
4) Swing trading is an investment approach that seeks to capture larger trend moves in the market by holding positions for longer periods of time than day trading.
5) Day trading is done during market hours while swing trading can be done at any time throughout the day.
6) Day trading is more common than swing trading.
7) Swing trading involves taking a position quickly and moving away from it, while day trading involves holding positions longer.
8) Swing traders tend to hold their positions longer while day traders may only hold them overnight.
- Day traders are generally younger than swing traders because they are more often college students and very often male (just as in securities markets on Wall Street).
- Day traders are also more volatile when they trade, as they can experience huge wins or losses within the same day
- Swing traders seek to purchase a stock for long-term investment, while day traders generally do not have the patience for such a strategy.
Which trading style fits you best?
Both swing and day trading are risky. Both have their place. You can find successful examples in both.
Many swing traders have made a lot of money trading, but it is not for everyone. Some investors believe that swing trading is more profitable than day trading because of the larger capital gains, but you can only trade with stocks and options you can buy.
Day traders may find themselves in trouble if they are unable to sell their positions quickly when stocks are moving rapidly. The swings and volatility make this type of trading very difficult to do.
Swing trading is much difficult than day trading, and the deadliest risk in swing trading is your emotion. On the other hand, day trading is comparatively easy as you have to follow a simple set of rules or even use an AI system to do the job. Whether you are a “Swing Trading Person” or a “Day Trading Person” is determined by the types of risk you are willing to take.