Among all the share trading methods, swing trading and day trading are the two most commonly employed methods. Both the methods are good and bad separately, and hence, one has to identify the pros and cons of both and determine which method would be most appropriate to your time investment level, intention, and nature. Both these forms of trading will be discussed here along with their greatest differences and the best way to select the best one among them through a simple 2-step evaluation process.
What is Swing Trading?
Swing trading is the practice of holding for days or weeks, short to medium-term price action of the market for a ride. The method is reading the direction in the trend direction of the price and taking the “swings” in the direction of direction of the direction of the stock price action. Swing traders will buy when a stock is undervalued, sell when overvalued, and profit in between.
Since swing trading doesn’t always synchronize with the markets, it is ideal for somebody who must go to work or remain at home during the daytime. Swing traders just take a glance at it now and then or even a day and look at their position and monkey around with it. It isn’t as demanding as the others.
What is “Day Trading”?
But day trading is executing a trade or selling the stock on trade day. They want to earn profits from minute-by-minute price movements on day-of-trade minute-by-minute. Day traders gamble on the size of a minute-by-minute psyche and technical analysis to an unimaginable extent in trading.
Whereas swing traders will be sitting at a computer screen all day hoping something will happen, day traders do not even take dinner. It is wear and tear on the body and mind, and most day traders will have executed hundreds of trades during the day. Day trading is physically and mentally draining with all the activity.
1. Time Commitment: The biggest personal variation between swing trading and day trading is the amount of time that you can commit. Swing traders will be monitoring their trades several times a day, but day traders must have the market in front of them an incredible percentage of the day. If you can’t commit that much time, then swing trading is what you should do.
2. Risk and Reward: Day trading is more risky because overnight positions are present. i.e., day traders must do something swiftly wherein which should be brought into the front so that they may place a position in light speed and it shall reap them out of the world gains or losses in seconds. Swing traders can risk money incrementally as they can change strategy at any point in time. More profit per trade but more so is made in swing trading.
3. Market Analysis: Day traders will be making short-term technical decision-making with fast decision-making. They are looking for intraday trends and reports, which may change on a share price basis. Swing traders both make technical and fundamental analyses because they are concerned with long-term trends. Swing trading will make you more flexible at analyzing and researching.
4. Level of Stress: Day trading is high stress and high speed. If you’re a high-strung, in-your-face, center-of-the-spotlight kind of person who enjoys being right in the middle of the spotlight, day trading is maybe your ticket. But if you prefer things to go a little slower and more smoothly, swing trading is your ticket.
2-Step Analysis: What Style Is Best For You
Thus, you can choose between swing trading and day trading, apply the easy-to-use 2-step analysis
1. Time Measurement: Choose how many hours you can trade. Suppose you have some spare time of one or two hours in the daytime, swing trading will be your cup of tea. But if you can sit at home the entire day in front of markets, then day trading will be your cup of tea.
2. Your Level of Risk Acceptance: Decide on how much risk you will feel comfortable with. Day trading will be taking on more, on-the-streets risk, but swing trading will allow you to have a small wiggle of size and scale to your entries. If you just so happen to possess a steel stomach for worse-than-woe and can belch forth quick-and-tacky judgment in bursts-and-flips style, day trading could be your ticket. But if you like your cake and eating it too and battling both ways, swing trading is most likely the ticket.
Conclusion
Lastly, the risk tolerance you can control and for how long you will stay in the markets will determine between swing trading and day trading. Well done, you have achieved the 2-step test. Now your turn. You be whatever you want to be, either day trading or swing trading, just always keep in mind that both forms must know, be disciplined, and be patient so that you will thrive
Anderson