Swing Trading Or Day Trading – Which Is Better?

Estimated Reading Time: 5 minutes.

Should you swing trade or day trade?

Before I answer this question, let's define these two terms:

  • Day Trading means opening and closing a position within the same day. When day trading, you often enter and exit a trade within minutes. So you never carry a position overnight.
  • Swing Trading means that you are trying to take advantage of larger price swings in the markets. Typically you will hold a position for a few days, or even a weeks. When swing trading, you normally carry a position overnight.

So which trading approach is better? - Swing trading or day trading?

I personally prefer day trading and here's why:

As a day trader, I like to control my risk. I will never be able to eliminate all risk from trading, but by holding a position only for a few minutes - or maybe even hours - I can control the risk much better than holding a position overnight.

Let me give you an example:

Let's say you are driving down the highway at 70mph. There's no traffic, the sun is shining and you are just cruising. Now you decide to let go of the steering wheel for a quick second. What will happen? Nothing! You're still in control of the car, aren't you?

Now let's assume you let go of the steering wheel for 5 seconds. What will happen? Well, maybe your car drifts a little bit into the other lane, but you can quickly correct it and since there's no traffic, probably nothing will happen. It might have been scary for a second, but you are still in control.

But what would happen if you decide to let go of the steering wheel, unbuckle, climb on the back seat and try to take a nap? The car will drive off the road and you'll get into a major accident, right?

And that's how I feel about holding a position overnight - you're simply no longer in control.

If you are trading a market that's open 24 hours a day (e.g. Forex or Futures), you could place a stop loss, but often the markets have some wild swings overnight. So, you might get stopped out with a loss, even though when you wake up the next morning, the market is trading more or less at the closing price of the previous day.

If you trade stocks or ETFs, then risk control becomes even more difficult. For example, you could place a stop loss, but if the market opens BELOW your stop loss the next morning, you will be out of your position with a much larger loss than planned. To be clear, let's say you bought a stock at $100, and you place a stop loss at $98. The stock gaps down and opens at $96 the next morning. In this case your stop loss order will get filled at $96, and instead of losing only $2 per share as planned, you will lose $4!

And especially these days the markets are crazy! News from Europe or Asia can cause huge opening gaps, which make risk control extremely challenging.

Some traders might say that when day trading, the profit potential is much smaller. That's true, but especially when trading futures, your day trading margin requirement is much smaller than your overnight margin requirement. As a result, you will have significant leverage. But, keep in mind that leverage is a double-edged sword and can work in your favor as well as against you.

But let me give you another example:

Let's say you are swing trading the e-mini S&P and you're holding a position overnight. As I write this post, the overnight margin requirement is $5,000 for the e-mini S&P, while many futures brokers will offer you $500 day trading margin. Therefore, you will get 10 times more leverage when day trading the e-mini S&P, than if you trade that same position overnight.

Now, let's assume your profit target is 20 points (=$1,000) when swing trading the e-mini S&P. It might take you a few days until you realize this profit. But if you are day trading, you could trade 10 contracts instead of just one, and you only need a move of 2 points in your favor to realize the same profit. A gain of 2 points would give you $100 in profits per contract traded, and since you are trading 10 contracts the total profit would be $1,000.

It would probably take the e-mini S&P only minutes to move 2 points, and I have no problem monitoring my trade for this short period of time. To me this is like taking your hands of the steering wheel for a few seconds. Chances are very low that you will wreck your car in this short timeframe.

Swing Trading or Day Trading? - Here Are My Thoughts

I like to control my risk as much as I can, and therefore I prefer day trading. I haven't held an overnight position since 2002. Especially these days the markets are crazy, and I don't like to worry about my position in the evenings or on the weekends. And I know I would if I had an open position. I would check the markets in the evenings before I go to bed, during the night when I wake up and first thing in the morning. That doesn't sound like fun to me!

What about YOU?

Do you prefer swing trading or day trading? What's your trading style and why?

Leave a comment!

Facebook Comments:

Leave A Reply (46 comments so far)


  1. Chuck S
    3 years ago

    If you trade options long, especially cheap options, your loss is more limited.

    A recommendation I heard is that if you get a big bad gap, wait to see if it moves back your way. Maybe exit if it drops below the first 15 minute low (if long).

    [Reply]

    Markus Heitkoetter Reply:

    Chuck,
    I agree: When buying options, your risk is limited. However, if you decide to sell options, then the overnight gaps can get you in trouble.

    [Reply]


  2. ram vel
    3 years ago

    Daytrading is only for people who are very smart and who have traded at least 2 years in position trading.education and a good mentor is must for daytraders while position traders can avoid it if they are desciplined.
    all or most daytraders do multiple trades without real purpose and waste time and money. tome I havent seen any good trader who can display live that he is good daytrader. most daytraders are panicky types and moody-emotional types-if power failure or pc crash hits them they are finished.

    Smart really? quick grasp? quick reflexes?
    then ok for 10% of time for daytrading
    ram

    [Reply]

    Markus Heitkoetter Reply:

    Ram,
    Discipline is extremely important in trading. It doesn’t matter whether you are swing trading or day trading. You must have a plan and follow the plan. You shouldn’t let emotions guide your trading.
    And I believe that day trading is a very good choice for beginning traders, since you can risk less on a day trading setup than you would on a swing trading setup. Therefore your risk is limited, which is good for beginning traders with rather small accounts.
    - Markus

    [Reply]


  3. Trip
    3 years ago

    Good post Markus, still trying to decide but so far have only day traded.
    Thanks.

    [Reply]


  4. sam choo
    3 years ago

    I never leave an open trade “naked”>
    That is how the big boys make $$$$, 24 hr watch by paid dealers.

    Most day traders are scalpers, and can make very quick $$$ if in big bets and sure of micro moves.

    Made 840.00 in just 15 mins. and exited market.

    wild swings exceeding 100 pips eat my bet!!.

    Scared stiff.

    [Reply]


  5. Jerry Agalabri
    3 years ago

    They both have it advantage and disadvantage because i trade as a Day trader and swing trader depending on what the market is ready to give me for the day. If for that day there is no much activity, i day trade and the trend is not well define but on the other hand if there is a clear good trend in place why would i close my position if i could get maybe 50-1000 pips than close out at 10-50 pips? Also day trade you get to pay more for each trade you place for example if you are making 10 trades and u had each 20 pips then u just made @ 1 standard lots=$2000 but swing trade i will only pay for just 1 position and aim 200 pips with the same results. So overall you get to pay less commission or other charges than day trading.

    Each trader will just have to find out which is best for him or she and have a trading plan in place otherwise you are sure to fail because failing to plan is plan to fail.

    [Reply]


  6. Frank Sherosky
    3 years ago

    As a trader and a writer for TorqueNews.com where I cover auto sector stocks and auto tech, I find swing trading within a day’s trading cycle the preferable choice for me. In other words, I swing trade within a day trade environment. Take the Euro futures for example: I use swing patterns to go long and short throughout out the day. I seldom take overnight positions, unless I have longer-term view such as gold. Even then I use the 5-min chart to define entry points. I never hold the mini S&P overnight as Asia and Euro news affect it too much.

    [Reply]


  7. clifford
    3 years ago

    I WOULD LIKE TO DAY TRADE BUT I CANT FIND A SET UP THAT IS GOING TO MAKE A GOOD MOVE OF A DOLLAR OR MORE, GOT ANY ADVICE???

    [Reply]


  8. friki
    3 years ago

    I prefer swing trading. I like day trading but it s really hard win money in trading day. How many people win money in day trading and how many people wins moneys in swing trading, May be, i prefer more risk with a overnight trading and try to win something with swing trading
    thank you
    sorry becasuse my english is not so good

    [Reply]


  9. Said Al Harthy
    3 years ago

    I have been a swing trader and i have now moved into day trading. It is indeed possible to make money in both strategies but i like Markus statement when he said swing trading is like leaving the steering wheel and take a sleep at the back seat. Though technology can work for us but can also work against. Better be in control of a situation, i therefore prefer day trading. less investment, less margins and huge profits by trading more contracts on a day trading. A discipline trader religiously following a plan coupled with risk and money management is more happy on day trading. Happy trading to all colleagues

    [Reply]


  10. Emad El-Antably
    3 years ago

    I agree with you .. day trading is better anyway. If I have an open order, maybe I’ll not be able to sleep.

    [Reply]


  11. Rollieroger
    3 years ago

    I agree with what you are saying, but I also think that some of the most reliable chart patterns occur on the daily charts. I have used options in the futures and stock markets to mitigate the risk factor. Part-time traders have no recourse but to do swing trading since the boss frowns on day trading ;-).

    I will say that if you stick to a strict 2-3% risk limit, your swing trades will be much smaller, as well as less frequent. So if you take one swing trade with a 2% risk and a 2:1 reward to risk ratio or you take five day trades with a 2% risk and a 2:1 reward to risk ratio, you can see the difference. I suppose you have the possiblilty to ride the trend much further on the day charts.

    [Reply]


  12. Arga Utama
    3 years ago

    everything is based on your necessity. if you have money and don’t have time, then swing is better but if you trade for your living and have small amount of capital and have plenty of time, then day trade is better.

    [Reply]

    Markus Heitkoetter Reply:

    Good point!

    [Reply]


  13. Alfred Phang
    3 years ago

    When market is either a strong uptrend or downtrend, swing trading is better and always can get a bigger chunk of the profit. while in sideway market, day trading is a better choice
    as losses are small.

    [Reply]


  14. LUIS DE MENEZES
    3 years ago

    Day trading is good if you are a winner.It is a full time business and you must be well educated in market technicals.You must know to control your greed and fear,for that you must keep your stop loss properly.You must know to select a good rating stock for the day and trade only one market to have a good concentration and focus.One disadvantage of day trading is the brokerage,you are feeding your broker .
    I am trading forthe last 20 years and if the market come against me I hold the stock as a swing trader,but I never average.
    Markus ich habe Gern dein schreibung
    Grussi

    [Reply]


  15. Irwin Godin
    3 years ago

    As for me I am in total agreement with you. Im in forex and had only $250 to work with. No way could I have swing traded. A lot of small trades to start with until I built up a more robust account.. Now I do an average of 2 – 3 high probability trades a day. At 89 I I can put in whatever time needed. I compare my results vs many of the longer term results shown on manyof the websites and am not only favorable but often exceed them over the same extended period. The spreads are negligible plus I sleep better. Your car driving examples are great. I would rather get 200 hits a season, score and drive lots of runs than to hit 30 home runs but strike out150 times and leave too many runners on base. (That was fun) However we all have freedom of choice. Bless them all.

    [Reply]

    Markus Heitkoetter Reply:

    Irwin, you are 89 years old and trading? That’s amazing!
    Out of curiosity: Are there any traders reading this blog that are older?
    And who’s the youngest trader here?
    If you don’t mind, post your age when submitting a comment.
    - Markus

    [Reply]


  16. cdeeky
    3 years ago

    Contrary to recommendation, I have found Swing Trading more profitable. However, having said this there are few conditions as follows to be full-filled:

    1. Stock Market must have depth and MUST be generating huge volumes.
    2. Select a particular share whose Candle is down 3 to 5 big Candle down and has big volumes.
    3. No adverse report about the particular share or environment.

    I have found if the above 3 conditions are met, it is easy to make money. The reverse is the case if short-selling is intended.

    Regards

    cdeeky

    [Reply]


  17. Oscar
    3 years ago

    Its the ideal thing to do (close the day and end the worries) but I cannot always do it.. . Im still to achieve that level, of course Day trading is better for our peace of mind.

    [Reply]


  18. Irwin Godin
    3 years ago

    One more thing I forgot to mention above. Currently, with the Euro zone situation as well as the time of the year, the forex is not doing well. However, while the few trades on the intraday are puny, I find that by increasing them by one lot that the results are decent. ( These are high probability,low-risk trades, though there are fewer of them right now).

    [Reply]


  19. Martin
    3 years ago

    I think if one reason a person day trades is because of margin is a dangerous approach especially to newbie traders and a cause for the high % of blown accounts. I believe using swing setups off larger time frames and incorporating scalping methods for entry results in better risk control. As far as margin is concerned there are brokers that offer margin for overnight trading but the lack of volume is often a concern, unless a key setup or some other catalyst is at work. In trading though you prefer to trade at key times when volume is normally larger to drive your trade but opportunity has its own schedule. I like to gauge my targets when they may be hit using fundamentals in conjunction with technical analysis and will often wait as price approaches …patience being the hardest part.

    [Reply]

    Markus Heitkoetter Reply:

    Leverage is a double-edge sword and can work in your favor as well as against you.
    Going back to the car example: Just because you have a car that can drive 200mph doesn’t mean that you should drive it at 200mph. You need to drive it at the appropriate speed based on your experience, skills and risk preference. The same applies to leverage: Just because you can get 100:1 leverage doesn’t mean you have to use it.
    - Markus

    [Reply]


  20. Mike Rich
    3 years ago

    I can make a case for distinguishing between swing trading that entails holding over the weekend and only holding 1 night during the week. If one knows something about what one is doing, then there is much to be made these days, as there are so many gap openings, by holding just over night during the week. Swing trading for a day or two may be a different category than swing trading as generally defined and understood.

    [Reply]


  21. ppsak
    3 years ago

    If your trade goes wrong, in day trading u have to book loss without any chance of recovering it. In swing trading at least you have some hope of recovering the losses. Moreover, day trade involves multiple positions as margins are limited, thereby incurring huge amount in terms of brokerages.

    [Reply]

    Markus Heitkoetter Reply:

    I would argue that you should always try to limit your risk by using a stop loss, and when the trade goes against you and hits your stop loss, you should get out instead of “hoping” to recover. That’s usually a recipe for disaster. Just my 2 cents :-)

    [Reply]


  22. Bubba
    3 years ago

    Hogwash … the assumptions used in your example are definitely false.

    Leaving a trade in the market for days or even monts at a time by no means implies that the risk associated with your opened positions has increased.

    In fact, many times it will be the opposite – your risk will decrease and your profits will increase significantly.

    If you want proof, I will send you a snapshot of my demo account in the last two months.

    I opened my demo account on oct. 17 with an openning balance of 10,000.00. During those two months, I have trade entered no more than 25 trades.

    The balance in my demo account now stands at 71,000.00 for a total profit of 61,000.00 over 25 trades in two months.

    Bubba Sceduba

    [Reply]


  23. Martin
    3 years ago

    Bubba, you missed the CNBC millionaire challenge you would had won!

    [Reply]


  24. Nikki Sokol
    3 years ago

    Day trading is my style. Buy stox under 10.00 and make sure you have checked the stock for
    a couple of days to see the average range. Or check out the news and see whats sizzling.
    ThinkorSwim platform gives you pre and post market prices so you can see the movers.
    You can make quick easy profits.

    [Reply]


  25. Priono
    3 years ago

    Depend on bullish or bearish? Why should I let my broker take my money, if I know it’s bullish season? I will do intraday on bearish..

    [Reply]


  26. Jim
    3 years ago

    Depends on the market conditions. Holding an overnight position in these news driven times is amplifies the risk considerably. These days the road is a lot rougher when you take your hands off the wheel for any lenth of time. However, when markets are trending deliberately (without all the potholes to shake things off course) then, the risk becomes less and the rewards for holding a trade overnight can be very worthwhile. Under these conditions, the equity can gap in your favor more often than not.

    [Reply]


  27. Mike Kerfer
    3 years ago

    For trading the futures markets that you do – I agree that day trading is the best. I day trade the Mini Dow due to the reasons you state. The major reason for me is being able to sleep nights without worrying about overnight risk. But I also have some option positions that I consider swing trades. Using options I know the maximum risk – my initial price for the options. Choosing the right strategy for the right market is always very important.

    [Reply]


  28. Gary
    3 years ago

    whats the risk of strictly trading mutual funds at the close of the market as opposed to day trading. I mean it would seem from reading all your material that you love to have your hands on the wheel at all times. This appears to be viable since you can research during the day and then trade once the NAV is assessed and the market closes. It would seem that you can pin point through out the day where to place your money. I am new, but I want to mitigate my risk in an all risk biz even though I want options in how, what, and when I trade.

    [Reply]


  29. Doctor Stock
    3 years ago

    The challenge of day trading is it is not available to the average person who cannot sit at the computer all day to watch the trades. I think with careful risk management, swing trading can be profitable for the part-time investor.

    [Reply]


  30. GoodTrader
    3 years ago

    Yo realizo Swing Trading principalmente. Me siento más cómodo con operaciones de varios días a varias semanas y si se manejan correctamente, conllevan muy poco stress.

    [Reply]


  31. Gloria
    3 years ago

    Marcus:

    The problem i have with your e-mini example is – if you increase your contracts you increase your risk considerably. 2% of a portfolio is ALOT riskier in such a short time frame – than 2% risk over a period of a week or more.

    gloria

    [Reply]

    Markus Heitkoetter Reply:

    Gloria,

    Good point! That’s why I like to use Ryan Jones’ Fixed Ratio Money Management technique: It reduces the risk while your account grows. I’ll write more about this in an upcoming blog post.

    - Markus

    [Reply]


  32. Earl McHugh
    3 years ago

    I agree with you entirely. Those traders who deride daytrading don’t stop to consider the risks of holding overnight, particularly in these days where both events and trading in Europe and other places often set the tone for the opening of our markets the next morning.
    On the other hand, a fellow I encountered today at another site said that daytraders were people who used 3 minute bars, or less, for 60 or more trades per day. He regard people like you who use 15 minute bars ( as he does ) as traders who trade within the day, but NOT daytraders!

    [Reply]


  33. jahar guha
    3 years ago

    d/mr.marcus

    I agree but it is hard task to crack and it is realy difficult to capture the skill properly specially in the realm of so many skilled trader.

    [Reply]


  34. Mriazkamran@gmail.com
    2 years ago

    Markus:

    Read your book Day trading strategy and also watched videos. Simple and straightforward.

    1. As you mentioned in video, you only use Volatility based charts for day trading, which is 20 tick bar chart. Searched hard trading platform has option to use Volatility based charts with ticks bars. Do you have an idea which system supports this option and approximate cost?

    2. If can not find tick bar charting software, and want to use time based bar charts then what time frame would you think close to tick based bar chart?

    3. Placing an order, one tick above high of bar (in uptrend) and one tick below low of bar (in downtrend), how many cents you consider equal to one tick? And if using time base charts then how many cents will equal to one tick bar (rouoghly).

    Thanks, Kam

    [Reply]


  35. David Sandanger
    2 years ago

    Hi Markus.

    Sometimes I like to swing trade and hold on to a trade I entered with my day trade rules (2 contracts, one exited according to plan). If I feel that the risk is to grate to hold on to a trade over the weekend, I spread trade. Let me explain. If I’m long in gold and it is Friday afternoon, I often place a short order in the next month contract. In this way I reduce the risk by holding on to the trade over the weekend. If something major happens in the world during the weekend, the two contract usually null out the risk. On monday, if the trend is still up, I exit the short position and hold on to the long position.

    [Reply]


  36. Craig S
    2 years ago

    The big difference between the two for me is the number of trades per month they typically allow and the compounding affect as a result. I have two strategies. 1) Swing trade 9 pair FX port on Daily/4hour charts circa 8 trades per month. 2) Day trade the EUR-USD on 5min chart circa 8 trades per day. Both have similar R:R and the swing trader has a better win % (71% compared to 58% day trader). Risking 2% per trade allows me to make (on bank) 10% per month on the swing trader but 10% a week on the day trader. Even adjusting to a 1% per trade risk on the day trader & 3% on the swing, the day trader still comes out ahead. Of course it does require monitoring for 4-5 hours a day as opposed to once a day and you can keep your job largely swing trading.

    [Reply]


  37. DFumagalli
    2 years ago

    Swing trading is not inherently better or worse. It’s another instrument in a trader’s toolset. Moreover futures are not “the law”, there are plenty of markets that don’t have overnight issues or huge gaps.

    Just spend 30 minutes a day setting up trades on a number of markets and then forget about it till the next day. Using several markets makes up for most of the slowness of building up profit compared to intraday and also lets spread the invested money over more markets reducing systemic risk. Swing trading is also somewhat easier due to daily bars being less affected by “noise”.
    The biggest issue with swing trading is that it’s quite hostile to be put and sold in trading courses or real time trading rooms and similar, so most prefer teaching intraday.

    [Reply]


  38. Ken
    1 year ago

    I have spent many years trying to become a good trader and also a good photographer. Now, at the wrong side of 70 years of age, I have concluded that no matter how good your strategy, plan, platform, or photographic knowledge and equipment, if after a year or two of sustained effort you don’t manage to get a feel for the subject, you are probably doomed to failure! I have still not ‘cracked it’ in trading nor photography and I believe, I now never will. It seems that I really don’t have what it takes. Is anyone looking for second hand books on trading or photography !!!!

    But take heart. Some of you young hopefuls, in time, and with perseverance, will succeed I feel sure. For those people, these articles highlight the important ‘ rules of the game’, and I congratulate the author for doing a great job with his presentation of them.

    Happy trading to you all.

    [Reply]

 
Questions? - Call Us:
(866) 467-0747 (toll free)
or (512) 553-0835
 

eBook The Simple Strategy




Stock Market Updates

  • 08/30/2014 What a week! -  What a week! Stocks ended the week and month of August on a high note with the S&P closing...


  • 08/28/2014 They won't give up! -  U.S. markets opened lower this morning and it appeared as though the bears were ready to take control...


  • 08/27/2014 Believe it or not... -  It's a bit hard to believe that the S&P has a new all-time high close of 2000.12. After...


  • 08/26/2014 Deja Vu? -  Today seemed a lot like yesterday...The indices gapped up and climbed higher. Then after the lunch break they...


  • 08/25/2014 Bingo! -  It's official...Today the S&P traded above 2,000 for the first time ever. After making a new all-time high and...


Google
Any Questions?
Contact Us
Email
Call

(512) 553-0835