The main difference between day trading and swing trading lies in the time frames used to determine long and short positions. We will examine each one of them and provide you with an overview of the benefits and disadvantages so you can determine which of the two trading strategies suits you best. A broad look at day trading and swing trading shows that there are several factors that can help you decide. These can be separated into the following categories – trades per day, profit per trade, funds management, risk, and reward.

The basics of day trading and swing trading

When going into one or the other, it would be important to know what the overall approach is.

It requires screening and analysing markets every single day in order to be able to make quick decisions.

Generally, day traders open and close trades from once a day to hundreds of times a day, and this directly correlates to the risk taken. In contrast, swing traders wait for financial assets to make a “swing”, hence they can afford to trade less often. Although there is the concept of breakaway gaps that could sometimes be a reason to earn or lose money as well.

Due to the smaller time frames in day trading, the profit targets are normally proportional to the trader’s readiness to risk their finances in the hope of making a profit. Thus, whenever trends occur, it is often within a window of several hours. That is when day traders can earn or lose the most.

If we look at the stocks of a company like Apple on a per-minute chart, we would see ups and downs that appear to have larger peaks and valleys which would be considered opportunities to go long or short on a position. Trades made would usually be smaller, but the win-loss ratio would also be on a smaller scale. When it comes to swing trading, the potential profit or loss can often be much greater, as the time frames are larger as well.

Day vs Swing trading: The main differences

Funds are managed differently in day trading and swing trading. Swing trading allows for the trading of available funds up to two times, while day trading doubles on that and makes it four times. In other words, just as with the rate of trading mentioned above, the larger the leverage, the greater the risk. Herein comes the idea of trading on margin. In order to manage your finances better, you could consider trading amounts of money you can afford to lose, avoiding single-position trades with all or most funds at risk, setting and keeping stop loss ready, and withdrawing earned funds from your trading wallet.

On the opposite side of the fence is swing trading, with an opposite risk profile to that of day trading. However, it has its own characteristic: overnight positions. For some, this may be a reason for being unable to sleep well, knowing that important events could influence the flow of markets during the night hours and welcome them with a considerable gap in asset value from the previous day’s close. Swing trades are also being charged a swap rate overnight.

The Risks

In our day and age of instant gratification, day traders can enjoy an immediate sense of accomplishment as a result of performing well. This also allows for a more immediate self-analysis throughout months and quarters, as for day traders this could be done on a daily basis.

With swing trading, more patience to notice and make use of trends is required. Getting out of one’s comfort zone for that long could also be a much bigger contributor to their sense of fulfilment.