Swing Trading vs Day Trading: Which is better for you?

A common question people getting into the trading world have is: should I day trade or should I swing trade? That is why TRADEPRO Academy dives into the swing trading vs day trading for you! There are common misconceptions that one is more profitable than the other. Realistically, there are many factors that will affect you decision and profitability. First we will go through the basics of each day trading and swing trading. Afterwards the article is going to outline some criteria a new trader must take into consideration before choosing one or the other.

Swing Trading vs Day Trading: The basics

First and foremost, swing trading and day trading are both trading styles that can be done with any asset class of your choosing. Whether its stocks, options, Forex, or futures. However there are some better suited for day trading and other better suited for swing trading.

Swing Trading

Swing trading involves holding a position for a longer period of time. Therefore anticipating larger moves with means one would generally take larger risk for larger reward. Swing trading can be done with all four of the asset classes mentioned above. However it is more advantages to swing trader some and leave the others for day trading. Swing trading could technically be classified as trading for longer than a day. Meaning any position held overnight and longer can be considered a swing trade. There are typically different lengths of swing trades, some last a week or two, while other can last a month or two. This is dependent on many factors, one being the risk and reward of the position.

For example, trading options and Forex would be more suited for swing trading. There is a multitude of reasons for why. Beginning with options. First, not all stocks are optionable. Commissions on options can be large, and you would require larger moves in the stock to make up for this. Meaning that you have to find volatile stocks, which would require more risk, if they are even optionable. Options are better suited for a swing trading approach because that allows traders to have a larger risk and reward profile to better capture true options moves.

Forex on the other hand can be used to day trade on occasion, but we find it more suitable for swing trading. This is because there are large violent swings at times, many due to news reports and some not. News reports can really hurt Forex traders. Swing trading Forex allows for patience for larger moves and tighter risk management.

Apple Stock-Swing Trade with Options

Day Trading

Day trading involves holding a position for no more than a day. When day trading, a traders goal is to end the day with more cash in his account than when he started. Day traders take multiple trades a day looking for quicker profits, and smaller moves. If possible large moves are welcome as well. The point being, risk is less per single trade than it would on a swing trade, meaning reward is also less. Day trades can last as little as a few seconds, to minutes and hours.

Trading futures is best suited for day trading. Margins overnight on some brokerage platforms are outrageous, reaching sums over $10 000 per contract. Due to high volatility and risk of loss. That is why day trading margins on futures are substantially lower, AMP futures offers $400 per contract on the S&P 500 E-mini. Commissions are lower on futures, so it is not a pain to day trade them as profits are magnified due to high leverage. Meaning so are losses. Futures calls for tight risk management and highly recommended bracket use when trading.

Globex Levels - Oil Example (CL)

Crude Oil Futures (CL) On Sierra Charts- Intraday chart

Honorable mentions

Stocks, Forex and futures all have a place in either category. However it does depend on the asset class you trading. We previously talked about the dual purpose of Forex. Stocks also have a place in the swing trading and day trading world. Swing trading stocks could be more common practice as it takes more capital and larger risk/reward parameters to trade the security. However, there are many people that day trade stocks as well. There are large fees that come with day trading stocks however, such as borrowing fees, exchange fees, and there are a lot associated with swing trading stocks.

On the other hand, one can swing trade futures. This should only be done when markets are trending, such as oil and gold. Remember risk will have to be slightly greater on the swing trade to account for overnight volatility.

Swing Trading vs Day Trading: Pros &Cons

There are pros and cons to swing trading and day trading. Neither is perfect. Each has its pro and con, and it depends on the traders risk tolerance, time constraints, and more.

Timing is everything

Trade timing is a key to any type of trading. However this section will go through a traders personal time constraints and which type of trading best suits those time constraints. Traders who work a day job might not be able to day trade futures. Depending on how the rest of their time is spent and also what time zone they are in. The US market has the most liquid futures, so we suggest traders day trade US futures. Japanese futures are also liquid, presenting traders with more opportunity there.

In short, if a trader does not have time to sit in front of their computer for 2-3 hours a day. They will most likely not be able to day trade at all. That is where swing trading comes into play. Swing trading does not require consistent screen time each day. If a trader can check on their positions for a few hours a week, they can be a successful swing trader.

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Account size

The second criteria to be looked at is a traders account size. In general, swing traders do require a larger account balance because they take on more risk on average per trade than their day trading counter parts. If we take options trading as an example, we recommend an options trader opens their initial account with $7 000-$10 000. While on the other hand, a futures trader can open an account with as little as $2 000 if they trade a 1-2 lot on ES E-mini futures. Of course leverage is large in both options and futures, but that is why we recommend tight risk management.

In general, options require a more money to enter into a trade, based on the premium price. If an options trader expects to earner higher returns, they will need to trade with larger size, and that involves a more expensive premium. Depending on the stock in question of course. While the margin required to trade a 1 lot on ES futures is $400.

The other swing trading alternative is Forex, in which one does not require a lot of capital. However, without a lot of risk tolerance, one should not expect to make a lot of money on a $1 000 Forex account unless over leveraged.

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Everyone wants to know what kind of profits they expect from either. Its a traders goal to generate profits. The truth is, the profits in either swing trading and day trading can be the same depending on account size, risk tolerance, consistency.

Futures trading does have more leverage than options trading, and can generate more returns on a percent basis. However if your options account size is substantial, one can generate large profits as well. Forex is known for extensive leverage and as such can be seen as the most profitable trading asset class. However that comes with over-leveraging, taking more risk than you should be, volatility and operating in highly unregulated markets.

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Stress factor

It is important to outline day trading stress factor vs swing trading stress factor. Day trading is the more stressful out of the two, there is a higher risk of burning out. The stress lies in making consistent daily gains. This is done by watching multiple screens, and trying to locate the best opportunities. Which requires quick action, and to be done day in and day out. Day trading requires a high level of concentration and focus. It is just hard to be at your best each and every day looking for consistent gains, which can take a toll on you.

Swing trading involves a lesser degree of stress, this is because it is less of a full time job. Its typical for a swing trader to have another job so the pressure is alleviated slightly. However there are some swing traders that trade full time. That other source of income takes stress away from the losses they might incur. Swing traders do not have to sit in from of multiple screens for hours on end, day in day out which can take away from burning out as quickly as a day trader might.

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Final Thoughts

Swing trading vs day trading is an ongoing debate. But it comes down to one criteria, and that is what style fits a traders personal criteria. Which style of trading does a trader want to do, where does he find intrigue. If you have a passion for either, you will find a way to make it happen. Both swing trading and day trading have high potential of returns, however both are two very different paths. Different in the asset classes chosen for each, risk tolerance, time constraints and account size. On a final note, TRADEPRO Academy is an advocate for both trading styles, and believes a well rounded trader should look into both styles as they can develop two streams of income.


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The information contained in this post is solely for educational purposes, and does not constitute investment advice. The risk of trading in securities markets can be substantial. You should carefully consider if engaging in such activity is suitable to your own financial situation. TRADEPRO Academy is not responsible for any liabilities arising as a result of your market involvement or individual trade activities.