Day Trading vs Swing Trading: Which is better for making money in stock market?

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Updated: Jul 06, 2020 7:55 AM

If the trader is patient enough, swing trading is better. Otherwise, day trading is better.

Both the trading techniques require concentration and perseverance.Both the trading techniques require concentration and perseverance.

Investing style depends on the preference, goals and funds available with the investor. Some traders love hurried single-day trades whereas some keep their positions open for days. However, it is important to understand that both day and swing trading have specific benefits. Both the trading techniques require concentration and perseverance. Success depends upon an optimal number of trades, adaptability to fluid market conditions and consistent course of action.

Swing trading
Identifying swings in stocks, currencies and commodities that take place over a period of days is the basis of swing trading. It may take a few days to a few weeks to work out. Swing trading is less time-intensive and is usually practised on higher time frames than day trading.

Pros
Larger target: The traders practising swing trading are not looking to make a small amount of gains; rather they look to make one overall good trade.
Time: Swing trading typically requires two-three hours of trading in a day. The rest of the day is free.

Frequent market watch: Traders can check the market a couple of times a day or even a couple of times a week.
Low risk: Opening fewer positions means you are less open to risk.

Cons
Patience: Swing trading can take weeks or even months before a trader can reach his target and close his position. Impatient traders will struggle with this.
Overnight risk: There is a risk of leaving position open overnight.

Swap fees: Broker may charge fees.

The risk from news events: Economic, political events and natural disasters can wipe out a lot of profit.

Day trading
Day trading comprises dozens of trades in a day on the basis of technical analysis and sophisticated charting systems. Day traders make a living from trading currencies, stock or commodities, by making small profits on a large number of trades and capping losses on unprofitable trades.

Pros
No overnight risk: At the trading day’s end, day traders sell everything.
Faster compounding of earnings: The earnings made by the trader on the earlier day can be used the next day to make larger trades.
Less capital required: In comparison with swing trading it requires less capital.

Cons
Trading strategy: Day traders are more likely to trade on emotion or on the opinion of others. The pressure to get trades right can affect decision-making.
More commissions: Because they trade more, they need to pay more brokerage which can bring down overall profit.

Extra time: This requires a trader to devote his time in front of the screen.

The main difference between swing and day trading is the time frame. Day traders work with a short and limited time frame whereas the swing traders work with a much longer time frame. If the trader is patient enough, swing trading is better, otherwise, day trading is better.

Source: Tax Guru

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