They are known for not holding a position for a long time for profit growth. But the main difference between the two is in their trading strategies.
The swing traders make several trades over a long time frame of up to 2 days, while the day traders make lots of trade in a single trading day.
Here are the similarities and differences between swing trading vs day trading.
What is Day Trading?
Generally, day trading is the act of purchasing and selling several financial instruments, including futures or bonds, to profit from the price change in a single day. Day traders tend to hold a position from a few seconds to a few hours on the trading day.
To avoid risk exposure, they always close their positions on the same day. In fact, everything is done within trading hours. Fortunately, anyone can become a day trader, but you’ll require time to monitor the positions. You’ll also need some indicators to know when to exit a position.
Another key benefit of day trading is keeping the cost low by opening several positions at the same time.
What is Swing Trading?
As the name suggests, swing trading is based on looking for swings in currencies, commodities, and stocks over a few days. In fact, this type of trade can take a few days to weeks to become profitable.
A swing trader may have fewer open positions, but they drive huge profits and losses. Since they open lesser positions, they pay fewer fees than day traders. But the fact that they hold these positions overnight means that they pay overnight funding charges.
Therefore, a swing trader is less likely to become a full-time trader. But a trader can choose to become a swing or a day trader.
Key Difference Between Day Trading vs Swing Trading
Swing and day trading techniques have several pros and cons, but neither is better than the other. Therefore, you should pick an approach that works with your lifestyle, preferences, and skills. A swing trader is a part-time investor, while day trading is a full-time job.
Day trading is ideal for investors who love full-time trading and possess diligence, discipline, and decisiveness. Therefore, if you’re not willing to commit more than enough time to trade, then you should try swing trading. After all, swing traders earn a considerable profit from the few positions they take.
Day traders make several trades in a single day, using short-term trading signals. On the other hand, swing traders make several trades every week. So they use momentum and trend indicators.
Another key difference is that swing trading can be accomplished using a normal brokerage account. On the other hand, a day trader uses some of the best trading tools and platforms to execute a trade.
What Does a Day Trader Do?
Day traders operate in a fast and thrilling trading environment and try to benefit from the many short-term price movements. And to avoid overnight charges, they release their positions before the trading day ends.
Day traders execute lots of trade in a single day, with their main goal being to get a profit from the many smaller trades. And being a full-time job, a day trader uses the best platform to execute their trades.
What Does a Swing Trader Do?
Swing traders are part-time investors who take several trades within a single week. Therefore, they rely on technical analysis that helps them identify when to enter/exit a position. Swing traders are known for holding their positions for several days while waiting for a massive price movement.
And as much as they are always waiting for a vast profit, swing traders risk losing big. Therefore, they have to be very careful and use all the tools to exit and enter trades at the right time.