When you enter the trading world, you will find that there are many different strategies. It can be confusing until you figure out what type of trader you want to be. The process of determining what kind of trader you want to be depends a lot on your personality, time commitment, account size and skill level. In this article, we present an overview of day trading vs. swing trading so you can begin to explore what is right for you.
What is Your Trading Personality?
Successful traders know who they are and what they can tolerate as traders. This has to do with knowing the traders’ personality. Once you know your personality you can decide if you are best suited for day or swing trading.
To begin exploring your trading personality, ask yourself the following questions:
- Do you want to be very active in the trading game, or would you rather sit back and watch?
- How much time are you willing to devote to trading?
- Do you want quick results or do you have patience to wait for results?
- Do you act quickly or do you like to take your time making decisions?
- Will you watch your trades all day long or check them once or twice a day?
- Are you willing to take risks? If so, are you a big risk taker or do you tend to be cautious or conservative?
Determining your trading personality is a book in and of itself but at least this will give you a good start.
Day Trading vs. Swing Trading
What is Day Trading?
Day trading involves selecting a few stocks and watching intraday (usually by the minute) charts all day long. Day traders will enter and exit trades the same day. At the end of the day, traders are out of all of the positions.
What is Swing Trading?
Swing trading involves selecting a list of stocks and watching a daily chart. Swing traders typically check positions at the beginning and end of day. Swing traders will stay in positions for two to several days.
Comparing Day Trading to Swing Trading
Some of the ways to compare day trading and swing trading are in terms of patience, effort, stress and risk.
One of the primary differences in the day trading vs. swing trading is the length of time traders wait to close positions. Day traders quickly buy and sell securities on the same day. So day traders close all positions that same day. Swing traders, on the other hand, typically wait one to several days to close positions. So the level of patience you need to have as a day trader is different than that for a swing trader.
As traders develop trading skills and build confidence with trading, this often leads to building more patience. So you might say that building confidence and patience go hand in hand.
All successful traders devote a lot of time and effort to achieve trading goals. This includes time for learning new concepts or ways to improve trading strategies. Traders also spend a lot of time flipping through charts to spot potential trading opportunities, making notations on the charts to highlight entry and exit points or just to practice spotting patterns and trade setups. So if you can spend at least 2 or more hours a week with your education and charts, you may be suited for either day trading or swing trading. The more time and effort you spend learning concepts and looking at charts contributes to your success as a trader.
Day traders spend more time trading than swing traders because day traders are placing new trades and exiting them every day. If you are not willing to sit at your computer for large parts of your day, then you may be best suited for swing trading. Swing traders, in contrast, may place more than one trade a day but will hold that trade overnight and allow that trade to work over several days. In some cases, if a trade continues to work, swing traders will hang on to that trade for a couple of weeks.
Stress and Risk
Day traders watch for trade setups and short term price movements usually using charts plotted by the minute (e.g., 1 minute, 5 minute, 15 minute and even 30 minute) and close all position at the end of the day. So when they shut down the computer for the night, day traders do not worry about news overnight that impacts the market. However, the stress of sitting in front of the computer all day can be stressful and draining. Day traders make quick decisions and day trading is the fastest trading method.
Swing traders focus on daily price trends and patterns rather than by the minute and usually check positions in the morning and before the market closes. Swing traders do not have to watch the charts all day. However, while the trade is working, swing traders do need to be patient and stay calm. There may be times when the market works against traders and overnight news can impact open trades. If the thought of leaving a position open overnight sends you into panic mode, you may want to consider day trading for now. Successful swing traders need to tolerate the risk that comes with keeping a trade open for more than a day.
Are You Best Suited for Day Trading or Swing Trading?
So is day trading or swing trading more your style? Consider day trading If you want immediate results, are willing to sit at your computer making quick decisions on several positions all day. Also, if keeping trades open overnight makes you nervous you may want to pursue day trading. Successful day traders target profits of 2-5% per trade.
Consider swing trading, if you like a more laid-back approach, and you’re able to stay cool in high-risk situations. Also, if you can tolerate holding positions overnight even if market news causes fluctuations in your positions then you may enjoy swing trading. Successful swing traders are looking for at least 10% - 50% per trade.
Remember that as you build confidence with trading, your patience may improve as well. So even if you think you don’t have the patience for swing trading, it can be developed over time.
To Learn More about Swing Trading
Swing traders, you are in the right place! Swing trading is what we do here at Hit & Run Candlesticks. As with any new skill, practice makes perfect. In trading, the “right practice makes profit”. If you are interested in learning “hands on” how to master some simple but effective swing trading strategies, check out Hit & Run Candlesticks. To learn more about our services, receive private online coaching, sign up for membership and enter the live trading room, please click here.
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