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Day Trading and Swing Trading? What's the Difference?

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  • Day Trading and Swing Trading? What's the Difference?

    Day trading or swing trading refers to the practice of buying and selling multiple stocks within a single day. It is the perfect vehicle for the short term intra-day type trader, who would like to hold on to a position for a short time, a few minutes or a few hour, and squares their positions prior to the end of the day.

    Day Trading

    The stock or futures day trader is someone who is making trades intraday. They tend to do this with frequency throughout the day. A day trader may trade a few times per day or dozens of times per day.

    Swing Trading

    The swing trader could be a stock, option or futures investor. This type of trader is looking to take strategic bites out of the stock market that can stretch over a day or multiple days and weeks.

    Long Term Swing Trading

    The long term swing trader is very much like the regular swing trader, the only difference is their focus is on weeks and months as opposed to normal swing traders who focus on singular days.
    • Day and swing trading involve taking a position in the markets with a goal of squaring that position before the end of that day.
    • A day trader typically trades several times a day looking for fractions of a point to a few points per trade, but who close out all their positions by the end of the business day.
    • A swing Trader has slower cycle of trades, meaning less trades to make, therefore fewer commissions, but also less chance of mistakes and an increased ability to "snag" the more significant multi-day profitable swing trades.
    • The goal of a day or swing trader is to capitalize on the price movement within a market trading day.
    • Unlike investors, a day trader may hold positions for only a few seconds or minutes, and never, ever overnight.

    What Day Trading really means?

    "Day trading " is a widely misused and misunderstood phrase or term. Officially day trading means to not hold on to your stock positions longer than the current trading day; simply put, not holding any stock position overnight. this is really the safest way to day trade, because you are not exposed to any of the potential losses that can occur, while the stock market is closed due to news that could affect the prices of your stocks. Unfortunately, a huge percentage of people who claim to be "day trading" hold stock positions overnight because of fear or greed, thus setting themselves up for the loss or decreasing of their capital. With the fluctuation of trading currencies, the term "day trading" changes a little bit. Since currencies can be traded around the clock, 24-hours-a-day, there is no such thing as "overnight" trading. So you can have open stock positions for longer than a day with active stop losses that could be activated at any time.

    Day trading has been divided into a few distinct styles, including:

    Scalpers: This particular style of day trading uses the rapid and repeated buying and selling of a large volume of stocks within seconds, minutes or hours. The goal is to earn a small profit share on each transaction while minimizing the risk.

    Momentum Traders: This particular style of trading involves identifying and trading stocks that are in a moving pattern during the day, the goal of this type of day trading style is to buy such stocks at bottoms and sell at the tops.

    Advantages of Day Trading

    No Overnight Risk: Since positions are closed prior to the end of the trading day, news and events that effect next trading day's opening prices do not effect your portfolio or your capital, you have what you had at market close the previous day.

    Better Leverage: Day traders have better leverage on their trading capital because of the low margin requirements as their traders that are closed in the same market day. This increased leverage could increase your profits if used correctly.

    Ability to profit regardless of Market Direction: Day trading often will utilize short - selling trading to take advantage of declining stock prices. The ability to lock in profits even as market falls throughout the trading day is extremely useful during bear market condition.

    Many people think day trading software and robots are illegal but in reality they are perfectly legal and a vital tool for most day or swing traders. I personally use Day Trading Robot because it is the best for swing trading. Most software trading robots are not designed for the many styles of trading outlined in this article only for day trading in general.

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    "Step into the arena and hold on to your hat. Don't get discouraged if you don't make 8 trillion dollars in your first month. Trading is not a get rich quick scheme. Realize that trading is a skill and just like any other skill it takes time to learn. Have convictions in your decisions in life and trading. Ignore the comments and "advice" of those that have never traded a day in their life."

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    Good KARMA and positive energy abound.

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