Swing Trading vs Day Trading

Swing Trading vs Day Trading

People ask me all the time, “Should I day trade or should I swing trade? Which is more profitable?” And that’s what we’re going to talk about right now, swing trading vs day trading.

Swing Trading vs Day Trading: Which one is better?

Swing trading vs day trading, which one is better? Well, let’s define it first.

When you are swing trading, and it doesn’t matter what instrument whether you’re swing trading stocks, or options or Forex. When you are swing trading you’re holding your position for a few days.

For me personally, I like to hold a position between 5 to 20 days.

When you’re day trading you’re opening and closing a trade within 1 day. For me personally, when I’m day trading I’m usually in a position between 5 and 20 minutes.

So swing trading 5 to 20 days, day trading 5 to 20 minutes.

What are the main differences?

swing trading vs day trading

So what are the main differences and what are the pros and cons?

Let’s talk about the first factor, time

When day trading you need to sit in front of the computer.

When I day trade, I sit in front of the computer for 1 hour. And here’s one important thing if you want to succeed with day trading, two conditions have to be met.

One, you need to be ready and two, the markets need to be ready. What do I mean by this?

Well, some people say, “I’m working throughout the day so I’m busy, but I can day trade at night,” and so they ask, “What is the best market to day trade from 8 pm to 9 pm?”

Probably none because the markets are not moving during that time. Based on my experience, markets move in the open and in the close.

This means between 9 am and 10 am Eastern Time, shortly before the open and shortly after the open, or from 3 pm to 4 pm which would be right into the close.

This is where for some people it might not be possible to day trade.

On the other hand, when swing trading you can do it any time, especially when the markets are closed. All you need is 15 minutes per day.

How I like to trade

I like to look at charts at night when the markets are closed to make my swing trading decisions for the next day.

By the way, if you’re interested in learning exactly how I do it, I’ve set up a website for you it’s called www.mytradingroutine.com  

If you go there you’ll see exactly how I find the best stocks, when I enter these stocks, where I place my stop loss and when I take profits – and this is for stocks and options.

So, the first criteria, time. If you have time throughout the day, day trading might be for you. If you do not have time throughout the day, swing trading might be better for you.

Let’s talk about the second factor, profit

After all, I said we want to talk about which is more profitable, swing trading or day trading.

Here’s a rule of thumb: The smaller the timeframe, the smaller your stop loss.

Let me give you an example so that you know exactly what I’m talking about.

Let’s say you’re trading a stock, and the stock moves $2 per day. When you’re swing trading, you need to place a stop loss of at least $2, otherwise, you might get stopped out throughout the day while the stock is moving.

And when swing trading, you want to be in a position between 5 and 20 days so you need to give the trade a little bit more room. Therefore, you need a stop loss of at least $2.

When day trading you can use a much smaller stop loss. I personally like to use a stop loss that’s 10% of the average daily range, the ADR.

So in this example, if a stock moves $2 per day you can choose a stop loss of only 20 cents. So the stop loss is much, much smaller.

Therefore, even though most people think that day trading is riskier, it is actually less riskier because you are risking less. The disadvantage is a smaller stop loss means that you have a smaller profit target.

The golden rule

The golden rule for me is that for every dollar that you raise, you try to make $2. So in our example when you’re swing trading and risking $2 you’re trying to make $4.

On the other hand, when you’re day trading and only risk 20 cents you’re trying to make 40 cents. What would you rather make, $4 or 40 cents?

Now here’s the important thing, when day trading you have more trading opportunities.

When you’re swing trading you might have one opportunity per day. When day trading you might have 4, 5, maybe 10 opportunities per day. So even though you make smaller profits, you make more of these smaller profits.

Here’s what I personally do

I personally swing trade stocks and options, and I day trade futures for leverage. Especially with futures you have enormous leverage.

For example, in crude oil, you have the leverage of one to one thousand.

What does this mean?

It means that if crude oil moves $1 and you’re trading one contract of crude oil futures, you’re making or losing $1,000.


Think about it this way

Swing trading is like driving a car at regular speed. Day trading is driving a car on the german autobahn with 160 miles an hour.

So when swing trading you can take your time to analyze the market.

When day trading you have to be absolutely focused, and this is why I only trade for one hour a day. After one hour I lose focus, and when it comes to day trading this can be dangerous.

Which one is better? Day trading or swing trading?

It depends on your situation. If you have time throughout the day to watch the markets and you know what you are doing day trading can be very profitable.

If you are new to trading I recommend that you start with swing trading and then after a while move to day trading.

I hope that you found this helpful. If you did, please leave a comment and let me know.

If you’re currently trading, what do you do and why? Why do you swing trade or why do your day trade? What made you choose one over the other?

And again, if you’re interested in how exactly I’m doing it I’ve set up a website for you it’s called www.mytradingroutine.com  

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