Swing Trading vs Day Trading: Which Strategy is Right for You?

Jeremy BiberdorfBy: Jeremy Biberdorf

November 10, 2022November 10, 2022

Are you the type of investor whose primary goal is to make a big profit in a short time frame? If so, then active trading is for you! Swing trading and day trading are two common forms of active trading. Each trading strategy offers unique advantages and disadvantages, making it vital to know the difference before settling on a trading style. In this article, we’ll be comparing swing trading vs day trading to help you—the reader—determine the best style of trading to hit your profit target!

What is Swing Trading?

This type of trading focuses on creating an extended trading plan. A swing trade takes place over days or weeks, rather than in one day. Due to this extended time frame, swing trading has a higher potential for profit (when compared to day trading). The spaced-out trading times allow the swing trader to enjoy a full-time job since they don’t need to be constantly monitoring their assets.

Although some swing traders trade full-time, most swing traders consider their successful trading a form of supplemental income, rather than their main form of income. While using specialized trading software isn’t necessary for this trading method, it’s nonetheless recommended to use a service like Tickeron to identify options & patterns.

The Benefits of Swing Trading

Swing trading is the best option for traders who don’t want to dedicate their entire lives to the stock market. Traders take days to weeks, the profit potential is high, and you don’t need any special software to swing trade successfully. In fact, your basic brokerage account will suffice! When comparing swing trading vs day trading, swing trading generally doesn’t require as much upfront capital, making it a much more accessible option to a potential investor.

The Cons of Swing Trading

Since swing trades take place over extended periods of time, traders will need another form of supplemental income to keep the bills paid. This swing trading strategy relies heavily on maintaining a positive trading psychology.

Swing traders often use technical indicators to identify the best trading options, but even the best analytics leave them vulnerable to overnight risk. The ability to stick with the initial swing trading strategy is key to success. Although anyone can start swing trading, it’s best to have at least a general grasp of fundamental analysis before beginning.

What is Day Trading?

The key difference between swing trading vs day trading is the holding period. Whereas swing traders look for extended trading opportunities, pattern day traders avoid overnight risk entirely by completing trades within market hours. This form of trading is ideal for those who want to become a full-time trader.

These retail traders base their entire lives around the stock market, placing day trading halfway between a career and a lifestyle! Although this type of trading is extremely high-risk and intense, there are many educational resources available to assist new traders.

The Benefits of Day Trading

Most pattern day traders enjoy the profit potential (along with the high risks) that come with this type of trading. Whereas another active trader may hold their assets for multiple days, a day trader works within a much shorter period of time: one day, to be exact!

By making multiple trades throughout the day, a day trader can make many profitable trades during a short period of time. Being a day trader is the equivalent of being self-employed, as it doesn’t require any formal training or degrees (although this can help). Instead, potential day traders simply need to gather enough capital to start making trades!

The Cons of Day Trading

Becoming a day trader requires having a high-risk tolerance. This trading style requires constant monitoring using fundamental analysis, making it best suited for more experienced traders. Since you’re working within short periods of time—minutes or hours—there isn’t any room for error. Simply keeping track of your daily chart isn’t enough; you’ll need dedicated trading software to become a successful day trader. This software can be very expensive, but it’s not the only ongoing expense. Transaction fees can add up quickly, cutting into profits.

Swing Trading vs Day Trading: Which Style is Right for You?

For investors who want a trading experience that will keep them on the edge of their seats, it’s hard to match the excitement of day trading! The stakes are high, the profits are instant, and the market offers something new every day. On the other hand, swing trading is ideal for investors who want to keep their 9-to-5 but aren’t interested in passive investing. This trading style offers more potential profit-per-trade than day trading, but also increases the overall risk.

So, swing trading vs day trading: which style is right for you? It depends entirely on your schedule, available funds, and willingness to commit!

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Jeremy Biberdorf
Jeremy Biberdorf

About the Author:

Jeremy Biberdorf is the founder of Modest Money. He's a father of 2 beautiful girls, a dog owner, a long-time online entrepreneur and an investing enthusiast.

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