The Big Question, what should you choose Day Trading or Swing Trading?
There are two basic short-term trading styles, widely accepted and used in the trading world. The first trading style which is very popular is Day trading. Day trading as the name says is a trading style which is focused on making money by taking multiple trades within the day’s boundary. Active traders use this trading style to get the profits out of the market on a daily basis and keeping the risk or holding the position overnight at the minimum level.
The other trading style which is widely used in the trading world is often the swing trading. While both the trading style seek to profit from short-term market movements the swing traders focus on short price swings in the price movement. How when we know that both the trading style is for full-time short-term traders but both are very different from each other which makes the question of which one to choose even more important. To find with trading strategy and style is best suited for you below, we had explained the qualities and limitation of both of the trading style to help you find your perfect trading style by letting you know both of the trading strategies in and out to let you give all the information you need to decide which style is the best for you.
Day Trading advantages
Day trading involves getting into multiple trades within the duration of a single day in order to get profits out of the market. with the help of technical analysis and fundamental analysis a day trader focuses to generate profits out of the market by taking multiple trades with the focus to close all the position with small profits by keeping the loss under control as a day traders primary objective is to make a living from trading and keep profiting from numerous trades and keeping the losses on unprofitable trades within the safe zone.
Day trading has a lot of advantages which makes it highly popular in the trading world. The biggest advantage of day trading is the potential get a huge amount of profits out of the market on a daily basis. However, this can only be achieved by discipline and well-researched trader how knows what it needs to do in order to get profits out of the market. these qualities are a must for a day trader and the focus of everyday trader is to keep his analysis sward sharp to cut profits out of a highly unpredictable financial market trading.
The day trading also gives the individual the power to be his own boss as a day trader usually works alone independently which enables him to take total control over all the aspect of the work which includes timing and work hours, unlike the corporate treadmill. Also, a day trading involves quick and fast-paced trading which keeps the day traders interest alive which an office desk working of a corporate firm misses the most.
To become a successful day trader you do not require any special degree or education unlike many jobs in the finance industry which need a lot of education and qualification. In day trading there are no formal educational requirements, however, to be a successful day trader you must keep your knowledge up to date with the market and know technical and fundamental analysis as well to get the profit out of the market with minim possible risk associated with it.
Disadvantages of Day Trading
Like any other profession Day trading also comes with some disadvantages and the biggest risk which is associated with day trading is the risk of substantial losses and an absence of a constant income. It is always bereaved that a day trader always lose the money in the very first month they start trading. This happened because of various reasons and one of the most common mistakes a day trader make is not focusing on the level of leverage which should be ideally used in day trading. Majority of the new day traders tends to fall in the trap of a huge level of leverage provided by the brokers and ends up losing a huge portion of the interment or even a full loss of capital can be happen because of a single loosing trader if a trader fails to limit the level of leverage with is provided to him.
The other disadvantage of the day trading which we had mentioned above is the absence of a constant income. Unlike any other profession and a corporate job where people get a certain amount as the remuneration at the end each month or week, Day trading does not assure profits at the end of the trading month. A day trader has to depend on his own skills to generate enough profit out of the market to pay off the bills and enjoy a decent lifestyle.
Advantages of Swing Trading
Swing trading involves much longer durational trades which can last for a couple of days, unlike day trading where the trading positions ideally should last only for the day. The analysis in the swing trading is based on identifying swings and reversals in the price chart of financial security like stocks, commodities, and currencies. A swing trader can take trades which may take a few days to a few weeks to get the most profit out of the market.
Anyone with knowledge of technical and fundamental analysis and investment capital can start getting into swing trades. Unlike day trader who needs to stare the computer screen the whole day and must take it as full-time work, a swing trader can do the trading on a part-time basis because of the longer timeframe analysis used in the swing trading which enables the trader to go the other routine and conventional work along with trading.
A swing trader can even maintain a full-time job and continue his swing trading as a part-time profession. Also, the swing trades generally need much more time to work out, keeping trade open for a few days or even few weeks by keeping the risk under a certain limit the profit possibility will increase tremendously higher than trading multiple time a day. A swing trader can make the equivalent amount of profits in a single trade which a day trader can manage to get in dozens of trades. The swing trader can set stop losses a forget the trade which is based on a strong analysis. This way a swing trader can avoid constant monitoring of the open position which in turn reduces the constant stress
Disadvantages of Swing Trading
Though there are very few disadvantages fo swing trading the few disadvantages swing trading have to make the widest gap which pushes the trader to jump today trading isted of swing trading. The biggest disadvantage of the swing trading is the higher margin money requirements. Since swing trading involves positional trades which can least for a couple of days even for few weeks it requires higher investment to hold the position as the leverage is almost negligible or even absent in the swing trading
The Bottom Line
Day trading and swing trading each have their own advantages and disadvantages. both of the strategies are very different from each other and neither of one is better than the other. It is always up to the individual traders to choose the approach that works best for their skills and suits the time they can give to the market as everyone have a different set of preferences and lifestyle.
Day trading is suitable for active individuals who are passionate about trading and can take trading as a full-time business. As day trading requires intense analysis and constant monitoring the open position and market throughout the day. On the other hand, Swing trading does not require a lot of time and thus a full time working individual can be a swing trader.