Day Trading vs Swing Trading: What’s the Major Difference

There are certainly similarities to be found between day trading and swing trading. Both types of active trading’s are for traders who seek to make a profit.

Both trade in short-term investments instead of long-term. And both have chosen a strategy that best suits their skills, lifestyle, preferences, and abilities. 

But that is where the similarities end. There are pros and cons to both day trading and swing trading.

In this article, we will take a more in-depth look at what is involved in both day trading and swing trading, reviewing the pros and cons of each.

Then we will explore which types of investors may benefit more from one versus the other. First up, day trading. 

What is Day Trading?

It’s all in the name of day trading.

Following technical analysis and highly advanced charting systems, day traders make dozens of trades in stocks, commodities, or currencies over the course of one single day.

Once the day is done, that’s it.

Day traders do not hold any positions or securities after the day is over. Let’s take a look at some day trading pros and cons. 

Pros of day trading

Substantial Profits

With day trading, there is a high potential for huge profits, and this is the lure that draws most day traders in.

Day trading is not for the faint of heart, however, and requires a potent combination of traits to create success.

Decisiveness, discipline, and diligence are key features of a successful day trader. 

Important Read: 10 Golden Tips for Successful Traders

Independence

Day traders work independently, which can be the perfect fit for a certain type of person.

As a day trader, you can choose to take time off whenever you prefer, you can work at your own speed, and you craft your own work schedule and hours.

It also means you will not be supervised by a corporate head. Since day traders work alone, you will not have to answer to any higher authorities.

Accessibility 

Most jobs in the financial field come with steep prerequisites and notable qualifications.

A degree from a top university can be a basic requirement for the job, which leaves out the majority of people.

For day trading, there are no barriers to entry based on your history.

It may be helpful to take a course in computerized trading and technical analysis, but other than that, anyone can qualify to be a day trader. 

Adrenaline Rush

As a day trader, you will be constantly engaging in a battle of wits with other professionals, and with the market itself.

Because of the limited time in which to make trades, each trade can be a make or break moment.

The exhilaration of this rapid-fire decision-making means you will never get bored.

So day trading is a good choice for investors who would not be content working a job with no highs or lows- day trading provides plenty of each. 

Cons

Possible Losses 

While there is a potential to make huge profits, many day traders who are just starting out suffer extreme financial losses during their first several months of trading.

Must Read: 5 Common Trading Mistakes and How to Avoid Them

Some may graduate from this status and start to earn profits, but many never do.

So day trading brings with it the risk of going into a substantial amount of debt, particularly if day traders are investing with borrowed money. 

High Competition

Every brand new day trader will have to face stiff competition from market professionals who regularly spend millions to glean advantages for their trades. Not to mention other high-frequency traders and hedge funds.

A beginning day trader has to spend a lot to match the competition in terms of high-tech computers, charting software, trading platforms, live price quotes, and commission expenses.

All of those expenses can add up, making day trading a potentially costly endeavor. 

Time Commitment and Stress

To really commit to day trading, most people have to give up the security of a regular salaried job and give all their time to being a day trader.

The potential profits will depend on each individual person’s skills and efforts, so the pressure can be enormous.

Because day trading is such a fast-paced atmosphere requiring a high level of focus and quick decision-making, the job can be extremely stressful and potentially lead to fatigue.

Important Read: A Beginner’s guide to Investing!

What is Swing Trading?

Swing traders follow swings in the value of stocks, currencies, and commodities over a period of days or weeks, and the trades themselves can take up to a few weeks.

Let’s take a look at some of the pros and cons of swing trading:

Pros of Swing Trading

Flexibility

Unlike day traders, swing traders can keep up with a separate full-time job while monitoring their trades.

Since trades take place over the course of several days, swing traders do not need to be stuck at their computer all day constantly watching out for updates.

As long as they keep an eye on the screen while they do other things, the trades can be taking place in the background. 

Accessibility

Like day trading, swing trading does not require prerequisites to enter.

It requires less overhead costs than day trading since it can be done with just a single computer and regular trading tools, without the latest in cutting edge trading technology.

Less Stress

Swing trading is rarely a full-time occupation, so there is a much lower chance of stress-induced burnout and fatigue.

Swing traders usually maintain another job that can protect them from the fallout of potential trading losses. 

Cons of swing trading

More Substantial Losses

Swing traders make fewer trades than day traders, but each of those can cause more significant gains or losses.

Since these trades may take a few days to work out, swing traders run the risk of more substantial losses. 

Limited Gains

Swing traders have a limited capacity for profit, as they exit their positions once their stop-losses are met or profit targets are reached.

This can protect from damaging losses but also prevent swing traders from gaining higher profits. 

Day vs. Swing

Day traders use analysis and charting systems to conduct a lot of trades over the course of a single day.

The goal with day trading is to try to make smaller profits on a high quantity of trades throughout the day while minimizing the losses from unprofitable trades.

Swing traders, meanwhile, follow the “swings” in commodities, currencies, and stocks that take place over several days or multiple weeks. 

For those investors with cash to burn and a desire to go all in and make trading their career, day trading is the best choice.

For new investors who are looking to dabble in the stock market, swing trading is a safer option. 

By investing in swing trades through the Wealthface app, you can feel secure knowing that your trades are constantly being monitored in the background while you keep living your regular life.