Swing Trading VS Day Trading - Which One Should You Choose?

Swing trading or day trading: What’s the verdict

Last Updated July 23rd 2021

12 Min Read

Swing trading vs day trading is a big topic and is very debatable. Which is better?

Well, the quick and simple answer to that question is it depends on your lifestyle and personality.

Think as this debate as not which is better but which trading style suits which needs.

Most traders will probably identify with swing traders or day traders and ideally before you start trading, you should know which of the two camps you belong to.

First, we’ll look into the differences between the two and then discuss what factors you need to consider before deciding which one you should be.

Get a comprehensive understanding of the differences between swing trading and day trading with our free forex trading course!

Swing Trading vs Day Trading: What’s the Difference?

There are several key differences between swing trading and day trading. Let’s look at what they are.

Swing Trading

Think of swing trading as investing but on a much smaller scale. The reason for the comparison is that it takes a lot of time to swing trade with positions often held for days, weeks or even months. Typically, it also requires a lot of work research beforehand as well.

Accessing markets on a longer time frame

It is also worth noting that hedge funds and large institutions swing trade because of the growth potential. Which can be seen as proof as to how successful swing trading can be.

In fact, when such large organisations open or close a position, it can often lead to a change in the current market price. We call these whales.

Pros of Swing Trading:

Larger targets. Swing traders are not looking to make small gains and build them over time, they look to make one overall good trade. This removes the risk of overtrading.
More time. Many swing traders typically spend one to two hours a day or week actually working. The rest of the day is free.
Not necessary to frequently check the market. Swing traders may only check the market a couple of times a day or even a couple of times a week.
Lower risk. Opening fewer positions means you are less open to risk.

Cons of Swing Trading:

More time spent waiting to make a profit. Can take days or weeks or even months before you can reach your target and close your position. Impatient traders will struggle with this.
Overnight risk. Leaving your position open overnight
Swap fees. Also related to keeping a position open overnight, your broker may charge you fees for this.
Risk from news events. This can include natural disasters, economic and political events which can wipe out a lot of your profit.

Day Trading

Day traders spend the whole day trading.

This method of trading can also be called intraday trading and can use a wide variety of strategies.

They start to open positions in the morning and close them by the end of the day, accessing markets on a higher time frame.

In order to do this, they need to sit in front of a screen for long periods of time, often hours, but you never know when you will see any volatility.

You could leave the screen for a little more than a minute and vital miss activity you could have used.

So little things, like needing to use the toilet can become problematic.

To be a day trader you may also need to change lifestyle to work around times when there is momentum.

A great example of this might be the London-New York overlap. This is where the New York Stock Exchange and the London Stock exchange are briefly open at the time.

In some time zones, this may be very difficult.

Day traders also think in pips, not in percentages and typically hold a position for up to 6 and a half hours.

Pros of Day Trading:

No overnight risk. By the end of the trading day, you have sold everything. You can end the day without feeling pressured or worried.
You can compound your earnings much faster. The earnings you made the day before can be used the next day to make larger trades.
Less capital required to start. In comparison with swing trading.
Feel more in control of your money.

Cons of Day Trading:

More likely to trade on emotion or other peoples opinions.
More commissions. Because you make more trades you need to pay your broker more. These additional costs bring down your overall profit.
More pressure to get trades right. This can affect your decision-making process.
Need to spend a lot of time in front of the screen. Be prepared to spend the whole day in front of the screen.

Similarities between Swing Trading and Day Trading

There are some small similarities between the two:

Despite swing trading taking place over a longer period of time, both still have the aim to make money in the short term.
Swing traders and day traders should both have a good understanding and use fundamental and technical analysis.
Both strategies can be used on other market instruments such as stocks, EFTs, for example.

Swing Trading vs Day Trading: What’s the Verdict?

Is Swing Trading safer than Day Trading?

Swing trading is less risky than day trading. However, trading in general is not risk-free. For beginners, swing trading is much better off than day trading.

In the end - and although it may sound cliche - it depends on what style is best suited to you.

You may also find that you like both swing trading and day trading. If you decide to use both in different situations.

There are plenty of traders out there who focus on swing trading, for example, but then change to day trading when there is a lot of market activity.

Different trading environments call for different strategies and so you should appropriately analyse the market beforehand.

That said, do not do both at the same time! It will become too complicated! Or at least not on the same instrument.

In the end, it really boils down to lifestyle…

If you have a full-time job, family or other priorities, day trading will be very difficult. In such cases, swing trading will be more appropriate.

To make it more difficult, you will likely miss the most active times in the market, lowering your chances of entering and exiting at good points.

If you plan on trading full-time and have the time to do it, you may find day trading a much better strategy. That said, you may still prefer swing trading.

Swing trading can be better for beginners who may have other responsibilities and haven’t had the chance to start full-time.

That said when you start it is often said starting small is better. You have the chance to do this more with day trading. While with swing trading, you may feel more inclined to take big positions which can be risky.

...And temperament

Some people can’t relax and wait, they need to feel like they are doing something all the time. They need to see the money coming in.

Such people will be more inclined towards day trading.

That said, you need certain personality traits in order to day trade. Those are the three Ds:

Decisiveness. You need to be able to make the decision to buy or sell in the blink of an eye.
Discipline. You are able to stick to the strategy you set yourself.
Diligence. They must be able to consistently stick to their strategy.

For swing traders, such traits are not as important. Instead, patience is their key personality trait.

Does Swing Trading Make More Money Than Day Trading?

In terms of money, you may end up trading more or less the same amount per month day trading or swing trading. A day trader may make up to 48 trades per month while a swing trader may make up to twelve. Depending on how much they use per trade, the percentage can be roughly the same.

Day traders are able to compound their earnings much faster. If they are successful, they can compound daily. This can be a significant advantage. However, as a daytraders trading account grows, they may find it difficult to use all of the funds they have accumulated over time.

They may even find that as their account becomes larger, they start making more losses on short-term trades. Day traders have the most profit potential when their accounts are smaller.

It also comes down to how much money you have in your account when you start.

A good amount for a day trader to start trading forex should be around $500 to $1,000. While $1,500 is a better number for swing traders.

Generally speaking though, swing traders are considered to be bigger earners than day traders, but that reason alone doesn’t mean that you should definitely become a swing trader.

In reality, it depends on how well you implement your strategy more than anything else.

More or less trades?

Making more trades means paying more commission and, more importantly, more risk. Many of the best traders say few trades are better.

The goal of trading is not to win every single trade. The goal is to be consistent and have a better win-lose ratio.

Having more than a 50% win rate is considered by many as successful.

It is easier to be more consistent with swing trading because you make fewer trades. Further to that, your trading strategy is more likely to be consistent…

Swing trading requires more patience. If you don’t have that, it can be problematic.

Alternatives to Swing and Day Trading?

Don’t feel like a day trader or a swing trader? Devising a trading strategy doesn’t always have to be defined by day trading or swing trading.

There are a few alternatives out there.

Scalping

Scalping is similar to day trading but on a rapid-fire scale.

Scalpers can make up to 100 micro trades in a day, piling up a profit from many small gains.

In order to scalp, traders need a super fast broker that is capable of entering and exiting positions as close as possible to the market price.

There is a high degree of risk associated scalping, particularly when you take into account that one bad trade could easily wipe out all of your gains.

Carry trade

Carry trading is utilises interest rates to turn a profit.

You can perform a carry trade by borrowing a currency with a low-interest rate and then using the funds to trade a currency with a higher interest rate.

Your profit comes from the difference you make from the interest rates.

Investing

If you want something slower than swing trading, you can always try investing instead.

Key points

If you remember anything from this article, make it these key points.

The main difference between swing trading and day trading is the time frame. Day traders work with a short time frame while swing traders work with a much longer time frame.
It depends on your lifestyle and temperament. If you’re a patient person, swing trading is better. If you need constant control, day trading is better.
Try both swing trading and day trading. At least once each to see which is better for you.