Swing Trading or Day Trading: Which Style Suits You Best?

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Last Updated:Oct 07, 2024

Swing Trading or Day Trading: Which Style Suits You Best?

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Stock trading can be confusing unless you are a pro. However, even the uninitiated can gain a lot of knowledge by doing research and asking for information from people who know what they are doing, getting answers to as many questions as possible.

Here, we will discuss swing trading vs. day trading, learn how they work, see their good and bad sides, and explain which one you should go with.

In this article

What is swing trading?

Swing trading is a style of trading where you can have short- to medium-term gains over a few days to a few weeks. That means you open a position and close it after some time (days or weeks). This type of trading is great for people who want to do it part-time or cannot constantly keep track of the market.

How does swing trading work?

Swing traders tend to trade with derivative products (products whose value comes from an underlying instrument), which allows them to open positions on rising and falling markets.

These traders usually look for markets with high liquidity levels and trading volume.

Even though swing traders don’t open many positions as day traders do, what they do open are more long-term trading styles. This, as mentioned above, allows them not to have to keep track of the market as closely as day traders have to.

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Is swing trading really profitable?

Swing trading can lead to profit in the short term, with 10% to 30% of people using this strategy profiting from it. However, in long-term swing trading, only 10% of swing traders make a profit, meaning that 90% of people who use the swing trading strategy lose money or break even.

Should a beginner do swing trading?

Swing trading can be a good strategy for beginners because it works and offers a good balance of short-term and long-term investing. This way, beginners can get used to trading without the added stress of monitoring the market on a daily basis.

Is swing trading risky?

Like anything in the stock market, swing trading isn’t without risk. Any investment that is supposed to bring you a profit quickly is risky, which comes with the territory. Still, not all risks are bad — think of it as a choice you are either comfortable with or not comfortable making.

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What is day trading?

Day trading is a fast-paced type of investing where you buy and sell securities on the same day (the name is very self-explanatory, no?). The goal of day trading is to maximize the profit you can make in one day. You’ll do it by monitoring the movements of stocks, options, futures, currencies, and other assets and buying/selling when the conditions seem the most favorable.

How does day trading work?

As explained before, day trading involves rapidly buying and selling securities on the same day. This way of trading capitalizes on the small price changes of highly liquid stocks or other financial instruments. Traders that do day trading will open and close positions in hours, minutes, or sometimes even seconds, so they profit from the small price fluctuations of the market— in contrast to the days and weeks swing traders favor.

Is day trading very profitable?

In theory, yes, day trading offers many opportunities to earn a lot of money in a small window of time. However, the reality is slightly different, with only around 3% of day traders achieving a profit long-term. Unfortunately, the vast majority of day traders lose money, sometimes very significant amounts.

Is day trading good for beginners?

Day trading for beginners is a little complicated; you have to have a bit of capital to start and then grow off of that. Having said all that, day trading can bring profits for beginners, but it takes a lot of time and effort. Learning how the markets work quickly is also very important because day trading requires making decisions about what and when to buy and what and when to sell.

Is day trading risky?

Short answer: yes. For most day traders, the profits from day trading can’t even cover the transaction costs like taxes and other fees. More often than not, it means that day trading results in losses. We mentioned that a mere 3% gain something from day trading in the long run, and the rest is either barely recovering the cost or ending in a loss. Since day trading is very risky, it’s up to you to weigh the pros and cons and determine whether the risk is worth taking.

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Choosing between swing trading and day trading

Now, let’s talk about both styles of investing together. The way swing and day trading work could not be more different. That said, both of them have their good and bad sides.

Swing trading involves opening and holding a position (or multiple) for days and weeks at a time, and you don’t have to keep a watchful eye on the market. Day trading, on the other hand, is based on opening and closing positions multiple times a day, so you must be extra vigilant in monitoring the market and its daily fluctuations.

Swing trading has a higher profit percentage, with about 10% of traders succeeding in the long term. For day traders, the percentage of those who earn something is significantly lower — only 3%.

Both investing styles can work for beginners, though they require different strategies to succeed.

Last but not least, both styles of investing come with their own risk, and it’ll take some thinking to decide which works for you and if the opportunities presented are worth putting your money on the line.

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