Day Trading or Swing Trading?

day trading or swing trading

Find out the difference between swinging for profits and trading actively each day.

Day Trading or Swing Trading? Figuring out which trading style you want to use can be difficult, especially if you’re an individual investor. There are a ton of variables that can influence your decision on which trading-style to use. And each style of trading has it’s own benefits. So how do you know if day trading or swing trading is the right approach for you? Well…

In this blog post I’ll share a little more information about day trading vs. swing trading, and give you some food for thought on how to decide which approach will work best for you. So while you might not get an immediate answer to the question of whether you should be day trading or swing trading, you will definitely be a lot closer to figuring out the trading style that’s best for you.

Day Trading or Swing Trading: Time Commitment

Day trading and swing trading both require significant time commitments. And if you don’t have enough time or interest to manage your portfolio then you should really hand it off to a professional investment advisor or money manager. But since you found this blog post I’ll assume you have the time, aptitude and interest to focus on managing your own stock picks and ideas (at least to some extent). So with that in mind…

You should know that day trading requires a ton of time and attention during the trading day. D’uh. This should makes sense, since day traders are jumping on opportunity while the market is open, and getting out flat so they can sleep at night. On the other hand…

While swing trading requires you to watch the market as well, you’re likely to be a little bit less focused on opening and closing positions every single day. So if you get called in to a meeting you can use stop losses and limit order to execute your plan for you. While this isn’t perfect, it’s a compromise a lot of swing traders are willing to accept (especially those who have other full-time or part-time work commitments outside the stock market). Of course there are swing traders who are in front of their screens the entire trading day.

In both the case of swing trading and day trading, you’ll need time before, during and after the market open to come up with your trading plans and do research to prepare for the next trading session. However, with swing trading you’re a little bit more likely to hold down a paying job. It’s much harder to “day trade” part-time. But that’s not the only difference…

Day Trading or Swing Trading: Platform Requirements

Compared to traditional buy and hold investing, day traders and swing traders both operate at a much more frenetic pace. You’re moving in and out markets to quickly capture percentage gains and limit losses. While this approach sounds similar for both swing trading and day trading, the truth is there are quite a few differences.

With swing trading, you can probably get by with a simple brokerage account that provides snap quotes and a live data stream of the bid/ask offers for your stocks. Your entries won’t be ideal, but since you’re looking to capture bigger moves happening over the course of a couple days or weeks, your entry point is a little bit less important. On the other hand…

Day traders need to have much better trade execution. If you try to day trade with a simple online brokerage account you are going to run into a lot of trouble. The deck is already stacked against you. At the very least you’ll probably want to Level 2 Quotes so you can have a much better handle on the order flow. The platform requirements for day trading are a reason a lot of day traders work at prop firms or other institutions that provide what they need to get the job done. Make sense?

Day Trading or Swing Trading: Personality and Lifestyle

As insinuated in the section above, a lot of day traders will work full time at prop firms, trading desks or other institutions that provide them with the environment they need to extract cash from the market every single day. Conversely, many swing traders only watch the markets part-time, as they work from home or their office job or while checking their positions in the evening.

To be sure, day traders can work from home too. But on the whole I’d say it’s a little less common. Since swing traders are concerned with finding multi-day or week trades, they take longer to execute, and by necessity there is a bit less to watch each second the stock market is open. Make sense?

Finally, it’s important to think about the kind of lifestyle you currently have (and the one you want) before you decide if swing trading or day trading is for you.

DayTrading, Swing Trading and Longer Term Investing:

In addition to deciding if you want to use day trading or swing trading approaches to improve your stock market returns, you’re also going to want to figure out how these short term approaches will match with any long-term investing goals yo have. Remember…

Trading is a profit-motivated activity. So you don’t want to start trading without any concern for what will happen longer-term to your portfolio of assets. Eroding this wealth would put you in a worse-off place than if you just saved money and didn’t trade. You know what I mean? So…

Think about what percentage of your assets you will use to swing trade or day trade. These techniques should ideally augment your longterm investment strategy, so be sure to consider the big picture of wealth when trying to decide between day trading and swing trading. Don’t lose sight of why you’re hoping to improve your trading.

And By The Way: If you’re still curious to learn how you can use¬†short-term trading techniques to augment your returns, I encourage you to check out my free mini-ebook. You can sign up below to get exclusive access to my methodology for incorporating swing trading techniques into value investing approaches


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