Warrior Trading Blog

Day Trading Vs. Swing Trading: Which Is Best For You?

day trading vs swing trading

Are you aspiring to be a trader? Well, in the trading world, it is important to figure out what type of trader you want to be. There are several factors one needs to consider in order to select the right path. Some of these factors include time, personality, size of the account, skill level and commitment among others.

To be a trader, there are a lot of strategies that need to be implemented too. This is done with the goal of taking advantage of the markets and profiting. Since successful traders have already selected their path, what’s yours? Do you want to be a day trader or swing trader? Here is an in-depth look at both professions.

Day traders are professionals who conduct a lot of trades during the trading day. They use technical analysis and charting systems not only to monitor the market but to implement their trading strategies.

They make a living from trading stocks, currencies and commodities. As a result, they are able to make small profits and cap their losses without the risk of holding positions overnight.

Swing traders on the other hand, use swing trading; a technique where traders try to benefit from the swing of financial instruments such as the price cycle. They are known to spot the start of a directional price movement where they get to enter the trade and exit when the price movement ends.

Day Trading

Day traders typically spend more than 2 hours each day to watch trade setups and short term price movements. They use advanced charting systems which are plotted by 1, 5, 15 or 30 minute intervals.

At the end of the day, the trader will simply exit all trading positions which means once they shut down their computer systems, they don’t have to worry about any news and how it impacts the market.

For example, a particular company trading in an international market may announce the discovery of a particular cure or they may announce the removal or hiring of a new CEO, COO or CFO.

As said earlier, day traders have to spend more than 2 hours in front of a computer system. This is stressful and day traders cannot find the time to sacrifice a few minutes or an hour to either recreate or even engage in their hobbies.

Despite this, day traders are known to make quick decisions which works on their side as they are able to profit from markets much easier. Thanks to this, day trading is regarded as the fastest trading method but at the same time you need to the type of personality than can digest information quickly and make split second decisions.

The best news about being a day trader is that you are equipped to handle fast paced trading with lots of volatility. Here is how day traders are able to accomplish this.

Volatility is a friend to day traders and as a unique indicator, day traders can monitor a financial instrument much easier. One of the most important indicators that day traders use to track and trade with volatility is average true range. This indicator can be used to track price movements in a financial instrument.

To determine the volatility of a stock, simply divide the current closing price of the stock with the ATR. If the value is higher, then volatility is greater.

Swing Trading

On the other hand, swing trading is more suitable for traders who are able to see the big picture and don’t have the time to sit in front of the computer to monitor charting systems.

It is true that swing trading is not time consuming when compared with day trading. Swing traders can take trades which last for weeks and months. As a result, they will only be required to update orders once in a week finally reducing time commitment.

Swing traders have the opportunity of placing orders at any time of the day. This is true even when the market is closed. As traders focused on the bigger picture, they are able to monitor daily charts finally placing trades when the markets closes.

The main benefit of swing trading is that persons who have full time jobs or can’t trade full time can still participate in the markets and make money which is why this type of trading is so popular.

Final Thoughts

When it comes to day traders vs. swing traders, it is important to understand that day traders profit more in percentage terms when trading on smaller sized trading accounts. For swing traders, they can maintain their percentage returns as their account grows. Regarding capital requirements, it varies between markets.

All in all, day traders need to be action lovers and as such, they are able to handle fast paced trading with lots of volatility while swing traders spend less time monitoring trades thus they are able to see the bigger picture.

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