Swing Trading vs. Day Trading Breakdown
Swing trading vs. day trading is a comparison that many new investors will make. It’s a great opportunity to learn more about both investment strategies. In addition, new investors can determine which strategy best suits their interests in the stock market.
Comparing Swing Trading vs. Day Trading
Swing trading and day trading are often compared. However, they’re different in many aspects. Unlike day trading, investors leave swing trading positions open overnight…
Specifically, swing trading occurs when an investor holds onto a position for one or more days to profit on price swings. And, in some cases, the investor may hold onto the stock for several weeks. The entire goal is to capture gains during this short time span.
And this is done by analyzing patterns and recognizing certain indicators. These swing trading strategies include moving average crossovers, cup-and-handle patterns and head and shoulders patterns.
Each of these indicators helps swing traders identify potential stock price movements to capitalize on. So, how can we compare swing trading vs. day trading?
Well, for starters, it all comes down to time. This is where these two strategies differ the most. In fact, they’re polar opposites.
Day trading is the process of buying and selling stock in a single trading day. Day traders use compounding to maximize their gains. And this can be done through multiple stock picks each and every day.
It’s a full-time job and there’s over 13 million day traders in the world today. It requires countless hours of research, data analytics and strategy adjustments. For example, day traders maintain winning position through:
- Daily pivoting
- Fading
- Movement trading
- Scalping
- News cycles and quarterly reporting
Each of these concepts has its own set of risks and rewards. And, in general, swing trading comes with more risk than day trading. And neither is a bulletproof concept.
The key similarity is the goal of using market research to capitalize on short-term gains. Swing traders, however, are willing to hold onto their stock picks overnight at the least. This opens up the risks of market volatility that day traders do their best to remove completely.
Which Strategy is Better for You?
This is where it can get tricky. But it always come back to time management and equity when comparing swing trading vs. day trading.
Day trading is a full-time job that requires more than 40 hours a week in most cases. Therefore, you can remove this concept from your choices if you aren’t willing to leave your current profession.
And the legal requirement to day trade stocks in the U.S. is $25,000. This is in place by the U.S. Securities and Exchange Commission (SEC) to protect investors’ equity levels. There’s an even longer list of requirements for day traders that have been implemented by the Financial Industry Regulatory Authority (FINRA) and the Federal Reserve Board.
Swing traders, on the other hand, would say it’s somewhat of a part-time job. But leaning closer to full-time. And the data analytics and research are just as in-depth as day trading. Trust me, you will start to memorize charts and numbers on a daily basis.
As you can see, both of these investing strategies takes a lot of time and money. So, they won’t be everyone.
We don’t recommend new investors taking on these types of investment strategies without further research and experience. Not even the most prominent investors have a complete understanding of the stock market.
It can take countless hours, days, months and years to gain the confidence and capital as an investor to take on day trading. However, you have a little more “wiggle-room” as a swing trader.
The Swing Trading vs. Day Trading Difference
There are so many differences of opinion amongst investors today when it comes to swing trading and day trading. And there should be. Every investor has his or her own set of interests when it comes to the stock market.
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The risks are high, but the rewards can be even higher with both of these strategies. All-in-all, the swing trading vs. day trading debate isn’t going away anytime soon.
Read Next: Can You Make Money Swing Trading Stocks?
About Corey Mann
Corey Mann is the Content Manager of Investment U. He has more than 10 years of experience as a journalist and content creator. Since 2012, Corey’s work has been featured in major publications such as The Virginian-Pilot, The Washington Post, CNN, MSNBC and more. When Corey isn’t focusing on Investment U, he enjoys traveling with his wife, going to Yankees games and spending time with his family.