Online trading has changed the face of the trading market with hundreds of new trading sites. The convenience of online trading coupled with the ease of access to countless trading platforms resulted in the rise of different trading strategies.
Day trading and swing trading, however, are two of the most popular trading styles (you’ll see later why), and most active traders belong to one group. If you’re new to trading and you want to choose the best trading style for your portfolio and budget, keep reading. We will cover the main differences as well as the pros and cons of swing and day trading.
Differences Between Day Trading and Swing Trading
To put it simply, day trading is a popular form of short-term trading that involves buying and selling stocks over the course of one day. Swing trading, on the other hand, is a form of investing in securities over the course of weeks or months. The swing traders hold the same position during this time, and they hold off selling the assets even when the market enters a bear cycle, for example.
So, the main difference between day traders and swing traders lies in the time frame and the decision they make during that period. Day traders typically hold an investment for just one day or less, while swing traders, as we mentioned earlier, will hold the same investments for longer periods of days to months.
The main goal of a day trader who trades during market hours is profiting from short-term price changes in individual assets or small groups of securities. They typically don’t trade a large number of stocks or assets. The nature of day trading isn’t best suited for large investments, and actually, many day traders need to actively pay attention to the changes in specific markets in order to profit off the price movements on a given day.
In comparison, a swing trader typically holds an investment for longer periods that can range from weeks to months, with the main goal of profiting from long-term price changes. Unlike day trading, swing trading isn’t that tedious and doesn’t require constant input by the trader, and most swing traders don’t see trading as a full-time career.
That said, whether you’re interested in trading as a hobby or a serious career, you will need a reputable online trading site. If you click here, you will have a chance to compare different trading platforms and what they have on offer.
Pros and Cons of Day Trading
There are many advantages to day trading as a trading style. Many investors get into day trading because they find it easier to make money with fewer shares during a short period of time. They wouldn’t be able to execute the sameeffective strategy when they are buying and selling larger amounts.
But, because you are trading within the course of one day, which means you won’t leave any position open by the end of the day, you don’t have much time to make decisions on what stocks to buy or sell.
Hence, you need to be diligent with your work and choices as you are making incremental profits from the price movements with the expectation that you’d be able to accumulate more. Another advantage is that generally, the risk is lower since there aren’t dramatic price changes over the course of one day.
The downside is that it is much more difficult to maintain a profit over long periods of time with this type of investing strategy. You also need more capital to start out in order to invest in smaller amounts at first so that your profits will be higher on each trade.
Pros and Cons of Swing Trading
Because Swing trading is based on identifying price movements in different securities like stocks, cryptocurrencies, currencies, or commodities, and currencies the swing trade may take a longer period of time to work out or to yield any results. In fact, swing trading can last from weeks to months to reap any results.
This is why you’ll need to have extensive knowledge of capital investments before you start swing trading and patience, of course, since it takes time to reach the desired results.
In conclusion, both trading strategies have their own advantages, but day trading is better for short-term goals and assets from liquid markets that offer more opportunities to profit off the price changes within a shorter period of time. Swing trading requires patience, diligence, and knowledge of online trading. That said, you can be a day trader and swing trader or choose a day trading strategy for certain assets.
Also, keep in mind that day trading is more rigorous, and it requires round-the-clock supervision and input by the trader. So, trading on a day-to-day basis is best suited if you have more free time or you want to make trading a full-time job.