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Day Trading vs Swing Trading – Which is More Profitable?

by | Aug 15, 2019 | Day Trading | 0 comments


Day Trading vs Swing Trading

Day trading and swing trading both have the same goal, but employ different strategies. Day traders plan to open multiple positions throughout the day and capitalize on gains. A day trader will always open and close his positions in the same day. Swing traders, on the other hand, employ a trading strategy that spans over several weeks and sometimes months. In short, day trading focuses on a higher quantity of trades in a shorter time frame while swing traders focus on a lower quantities of trades over a longer period of time. In this article we’ll look at the pros and cons of day trading vs swing trading.

Swing Trading Profitability

Is Swing Trading Better Than Day Trading?

Swing trading and day trading are both two sides of the same coin. While day trading may seem more profitable than swing trading due to the sheer number of trades, there is a much higher mental fortitude required. Firstly, because you are engaging with the market on an hourly basis you are often forced to be a full-time trader. A day trader has to be vigilant and equip himself with charting software and powerful computers. Furthermore, a day trader also has to constantly focus on the market with a sharp sense of discipline and decisiveness. A day trader does not have to be correct on 100% of their trades, but they do need to consistently beat the market. While this may seem like an easy endeavor, it’s important to note that day traders are competing against large hedge funds and other day traders who are equipped with the same machinery and strategy.

Swing trading, on the other hand, has its own set of benefits and challenges. Similar to day traders, swing traders also need to be very patient and disciplined with their decisions. However, swing traders can often hold another full-time job while trading because they don’t care too much about the small daily fluctuations. Having a second source of income is not only beneficial for your wallet but also is great for your mental health. A swing trader is not as dependent on the market for survival, and are less likely to burnout and succumb to stress. However, this mental luxury comes with a price. A swing trader will not capitalize on all the fluctuations in price on a given day and may end up losing a larger amount of capital because they are not as well-informed as the day trader. In fact, if a stop loss is not set, a swing trader could check back to find a sizable amount of their investment lost.

How Much Money Do You Need To Be A Swing Trader?

The amount of money required for swing trading is fully dependent on your propensity for risk and what you are looking for. If you are looking to be an aggressive trader that wants to immerse yourself in swing trades you may want to save up more capital. A swing trade is based upon knowledge and intuition, and if you are correct, you want to put yourself in a position where you can reap plenty of gains. As a basic rule of thumb, anything that you put into a trade you should be fully prepared to lose. In order to execute on trades and receive meaningful gains we suggest having at least five to ten thousand dollars of disposable capital.

Does Swing Trading Work?

Swing trading always works exactly as it should. It rewards those who have been paying careful attention to the market and are trading with a disciplined mindset. While a skilled swing trader may lose big on a single bet, they will almost always turn a profit over several of their swing trades. It’s imperative that a swing trader does not choose swing trading because they believe it to be the easier method of trading in comparison to day trading. In many ways, swing trading is just as difficult because you are still making a bold prediction of something that is completely out of your control.

What Do Swing Traders Look For?

Swing traders try to ride large price changes by using both technical and fundamental analysis. Technical analysis is often attributed mainly to day trading, but these skills can prove useful for swing traders as well. As the time frame that a swing trader focuses on changes so too does their general trading strategy.

Swing traders often look for stocks that are popular and actively traded. By choosing large-cap stocks, swing traders already have a general idea of the broad spectrum that the stocks will oscillate. If the swing trader has an idea of which direction the stock is trending, he/she can ride the wave and capitalize on gains.

It may seem counter-intuitive but swing traders prefer stocks that are not too volatile. If a stock is continually rising, it may be better to employ a trend trading strategy rather than a swing trading strategy. However, if there is a stock that is essentially going nowhere, you may want to consider swing trading. A stock that is continually repeating the same general pattern in the same range is a safe bet that can turn a profit a high percentage of the time.

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Day Trading Profitability

Is Day Trading Better Than Long Term?

Day trading is not better than long-term trading. Conversely, long term is not better than day trading. Day trading definitely has a higher potential profit return. A professional day trader can make up to 3% gains per day. While this may not seem like a large amount of profits, this number can compound and quickly make you millions if you start with a respectable amount of capital. Day trading requires a large amount of discipline and does not take into account the fact that there will also probably be many days where you lose 3% or more on a given day. As we discussed earlier, day trading not only has a monetary investment but also a time investment. Are your trading skills so poignant that you should give up your full-time job?

Long term trading in comparison can be much more relaxed. Some long term traders who are very confident in their intuition can check their investments just a few times each month. This is a stark contrast to the daily traders who can be trading for up to 40 hours a week.

What Percent Of Day Traders Are Successful?

The truth of the matter is day trading is a difficult endeavor. We do not suggest day trading unless you are ready to apply yourself and become a master of technical analysis. The exact number of day traders that are unable to turn a profit is unavailable anywhere, but some suggest that 90% of day traders lose money. While this may be daunting, most of the traders that fail are individuals who think they can get rich quick and make rash trades that are not based upon charts and logic. The fact that you are reading this article is a great indicator that you are ready to commit fully and equip yourself with the skills necessary to beat the market.

Can You Make A Living As A Day Trader?

Yes. A day trader can make a living or make a fortune. A day trader can also lose their entire savings if they lack discipline and a fundamental knowledge of market movement. Asking if a day trader can make a living is the same as asking if a poker player can make a living. It is definitely possible to be the Dan Bilzerian of poker, but it is also possible to be one of the many schmucks who lose to him.

How Much Money Do You Need To Day Trade?

To day trade stocks you need to have at least $25,000 as a balance. This is the minimum balance, but we suggest that you have at least 30-50k before you jump into day trading. Starting with an account balance that is higher than $25,000 comes with a few advantages. The first obvious advantage is having more capital means you are free to make larger trades and turn larger profits. However, it’s also important that you cannot execute any trades if your account balance dips slightly under $25,000. This is a strict rule that could prevent you from making a pivotal trade if your account balance accidentally swings just slightly below $25,000.

Day Trading or Swing Trading?

Whether you choose to day trade or swing trade, you are never locked into a single strategy. If you find yourself overly anxious in a swing trading position, or feel the burnout while day trading, feel free to switch to the other side. There are also a percentage of traders who simultaneously hold day trading positions and swing trading positions. There is no “correct” way to trade regardless of what other trading experts may believe. At the end of the day, do what is best for your account balance and for your mental health. Best of luck!

 

NQ Day Trading Trendline Break

NQ Day Trading Trendline Break

Candlestick Charts

Candlestick Charts

 

 

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