Introduction
Both swing trading and day trading are the most popular short-term trading(buying and selling of securities) strategies. Swing trading refers to the medium-term trading style in which traders hold financial instruments (for example, stocks, commodities or currencies) for few days to weeks with the aim of capturing a swing or to earn from price movements. On the other hand, day trading is a short-term trading strategy in which traders buy and sell securities within the same day. The main goal of day trading is to earn profit from small price fluctuations. In this post we are going to highlight some major dissimilarities between swing trading and day trading that helps to understand the benefits, challenges, their suitability etc.
Difference Between Swing Trading And Day Trading
Key differences between swing trading and day trading can be pointed out as follows:
1. Meaning
Swing Trading: It is a short-term or medium-term trading strategy in which traders buy and sell securities within a few days or few weeks.
Day Trading: It involves trading (buying and selling) financial instruments such as cryptocurrencies, stocks, commodities etc. within the single market day.
2. Time Horizon
Swing Trading: It may takes few days to few weeks for the traders to hold positions
Day Trading: In this trading method securities are bought and sold within a few minutes or few hours
3. Advantages
Swing Trading: The main advantages of swing trading are:
- It is less stressful
- It is ideal for new traders
- Requires less transactions and commissions
Day Trading: The major advantages of day trading are:
- It avoids overnight risks
- Possibility of quick profit
- Traders get multiple trading opportunity
4. Disadvantages
Swing Trading: The major drawbacks of swing trading are:
- Possibility of overnight risks
- Capital tied up for long period of time
- Needs more patience and time
Day Trading: The main disadvantages of day trading are:
- It is more stressful than swing trading
- Requires fulltime monitoring quick decision making
- Requires high transaction costs
5. Goal
Swing Trading: The main goal of this trading strategy is to make larger profits by capturing swing
Day Trading: The goal of day trading is to make profit from small movement
6. Time Required
Swing Trading: It requires few hours per week for market monitoring
Day Trading: It require full time to check or monitor the market
7. Risk Involved
Swing Trading: It involves moderate level of risk
Day Trading: It involves high level of risk because of short-term volatility
8. Capital Required
Swing Trading: It requires less capital than day trading
Day Trading: It requires more capital because of multiple trades per day
Also Read
Pros And Cons Of Swing Trading
9. Earning Potential
Swing Trading: It has moderate but consistent earning potential
Day Trading: It has high but inconsistent profit potential
Swing Trading Vs Day Trading (Comparison Table)
|
Basis |
Swing Trading |
Day Trading |
|
Earning Potential |
Moderate |
High |
|
Required Capital |
Less |
More |
|
Stress |
Less |
More |
|
Risk Involved |
Moderate |
High |
|
Time Required |
Few hours per week |
Full time |
|
Goal |
To make larger profit |
To make quick profit |
|
Time Horizon |
Few days to week |
Few minutes or hours |
Final Thought (Which Is Suitable For You)
From above comparison we can say that both swing trading and day trading are good trading options. But if you can dedicate more time and can handle stress then day trading may the suitable option. But if you have limited time and searching for relaxed option then swing trading is ideal.
