Swing Trading vs. Day Trading: What’s the Difference? - Benzinga Pro (2024)

Flipping stocks for a living is the dream job for many traders. Some of the perks a successful trader can enjoy: no boss, no schedule, and as much vacation time as you want. You don’t even have to get out of bed if you don’t want to. Traders employ several different methods when flipping stocks like day trading, swing trading, and buy-and-hold. If you’re looking for quick profits, buy-and-hold probably isn’t very appealing. In that situation, traders turn to either day trading or swing trading.

What is Swing Trading?

Swing trading, a short-term trading strategy, is designed to profit off price movement over a period of days or weeks. Unlike day traders, swing traders relinquish some control over their trades by holding positions overnight. Since pre- and post-market trading tends to be the most volatile, swing traders sometimes encounter a big loss. This also works in reverse too – if a company releases successful clinical trial results after the market closes, a swing trader can reap a huge gain just from holding overnight.

Swing traders often utilize technical analysis and other advanced trading strategies to find opportunities, but not at the level day traders have to. While day trading often takes hours of prep work and chart analysis, swing trading is more of a part-time job. Fewer trades are made each week and less monitoring is required of those trades.

What is Day Trading?

Day trading is a more intricate type of stock trading that requires both time and a knowledgeable eye to perform successfully. Unlike swing traders, day traders don’t hold their positions overnight. Multiple trades are often made each day, with positions opening and closing in a timeframe of hours to minutes.

Day trading is a fast-paced lifestyle that requires not only the time and patience to learn, but the dedication to remain glued to your screens for hours each trading day. Sometimes you may hit your daily profit goal within the first hour of trading, but you’ll usually spend a few hours each day scanning the markets and looking for opportunities. Day traders use more sophisticatedtechnical indicators than swing traders and entry/exit points must be far more precise. Additionally, capital requirements are in place for day traders – more on that below.

What Are The Main Differences?

  • Potential Returns – Day traders have the potential for higher overall returns because they’re trading more frequently and putting more capital to use. While swing traders often look for a few big wins here and there, day traders look to make quick gains on their trades and cut bait fast on any losers. Racking up incremental wins over and over might sound tedious, but that’s what makes day trading difficult.
  • Capital Requirements – The SEC has certain requirements for those labeled as ‘pattern day traders’. Under SEC guidelines, a day trade is characterized as any position opened and closed within the same trading day. If you attempt to make more than three such trades in any five-day period, you’ll need to have at least $25,000 in your account to continue day trading. Most brokers will block trading access after three-day trades if capital requirements aren’t met. Swing traders are under no such limitations as long as their positions are held overnight.
  • Length of Holding Period – Day traders close all positions before the 4 pm EST bell and hold no stocks overnight. This gives day traders more control over their positions and fewer chances of a surprise decline. On the other hand, swing traders can hold positions for days, weeks, or even months depending on their strategy and trading goals.
  • Strategies Utilized – Swing traders often use technical analysis in their trading, but for day traders, it’s a must. Since day traders often look to make profits off price movement as minuscule as 1%, getting things exactly right is key. Day traders using moving averages to target ideal entry and exit points, since every penny matters when making these types of trades. Day traders also need a scanner to mine the market for opportunities since watching thousands of different stocks is too much for two eyeballs to handle.

Should You Swing or Day Trade?

Now that you have a better idea of the differences between swing and day trading, which should you pick? First of all, with any type of trading or investment endeavor, make sure to do your research beforehand and identify the risks suitable to you. That being said, below are some pros and cons to get you started with the process.

Swing Trading Pros and Cons

  • Pro: Unlike day traders, swing traders can get started right away because there are no capital requirements if you hold your trades overnight.
  • Con: Swing traders make their profits slowly over time. When time periods are measured in weeks and not hours, some range-bound trading is to be expected.
  • Pros: No capital requirements for swing traders. As long as you hold a position overnight, you won’t be tagged as a pattern day trader.

Day Trading Pros and Cons

  • Pro: Profits, profits, profits. Since day traders trade every day, making money every day is the name of the game. Sure, you won’t bat 1.000 on your trades, but aiming for 6 or 7 out of 10 is enough to be successful. Good day traders can pile up profit quickly.
  • Con: Time and money are necessary to become a successful day trader. Not only do you need to meet the $25,000 requirement from the SEC, but you’ll need a stock scanner and other charting tools that might not come free. Additionally, you’ll need to focus a good part of your day on reading charts, scanning the market, and monitoring your positions.
  • Pro: Day trading can be a full-time job if you’re good enough at it. Most full-time day traders fail within the first year or so, but those who stick with it and learn to profit consistently can ditch the office lifestyle and work at home for themselves.
  • Con: Burnout is real amongst day traders. When your income is entirely tied to your trading performance, a few bad days or weeks can ramp up the stress. If you don’t have the right mindset, day trading might leave you on the wrong end of a margin call

Final Thoughts

When deciding between day trading and swing trading, think about your goals as an investor. Can you handle the stress of daily trading? Are you looking for immediate riches or trying to gain wealth over time? And of course, do you have the necessary capital and computing power required to be a successful day trader?

Most traders start using swing trading methods before graduating on to the more intense day trading regimen. If you don’t feel comfortable giving up your career and focusing on the markets full time, then swing trading is probably how you’ll want to trade for a while. But if you have the acumen, technology, and temperament for day trading, practice some day trades on a simulator before moving on to the real thing. Remember, day trading is not for the faint of heart.

Swing Trading vs. Day Trading: What’s the Difference? - Benzinga Pro (1)

Disclaimer: Benzinga is a news organization and does not provide financial advice and does not issue stock recommendations or offers to buy stock or sell any security.Benzinga Pro is for informational purposes and should not be viewed as recommendations. Benzinga Pro will never tell you whether to buy or sell a stock. It will only inform your trading decisions. You can find our full disclaimer located here.

As an enthusiast and expert in stock trading, with a deep understanding of both swing trading and day trading, I can provide valuable insights into the concepts mentioned in the article. My extensive experience in financial markets and trading strategies enables me to shed light on the nuances of these two trading methods.

The article discusses the dream job of flipping stocks for a living, highlighting the perks of being a successful trader, such as no boss, flexible schedules, and the potential for unlimited vacation time. It outlines different trading methods, focusing on day trading and swing trading, and explores their characteristics, strategies, and potential returns.

Swing Trading: Swing trading is depicted as a short-term trading strategy aimed at profiting from price movements over days or weeks. One notable characteristic is the willingness of swing traders to hold positions overnight, exposing them to pre- and post-market volatility. The article emphasizes the use of technical analysis and advanced trading strategies by swing traders, albeit at a less intensive level than day traders. The length of holding periods for swing traders can vary, making it a part-time job with fewer trades per week compared to day trading.

Day Trading: Day trading is portrayed as a more intricate and fast-paced form of stock trading that demands both time and a knowledgeable eye. Day traders differ from swing traders in that they do not hold positions overnight, engaging in multiple trades within the same day. The article highlights the need for sophisticated technical indicators, precise entry/exit points, and the dedication to constant monitoring. Capital requirements, including the SEC's guidelines for pattern day traders, are discussed as a key aspect of day trading.

Main Differences: The article delves into the differences between day trading and swing trading, focusing on potential returns, capital requirements, length of holding periods, and strategies utilized. Day traders are noted for their higher potential returns due to more frequent trading, but they face stricter capital requirements. Day traders close positions before the market closes, while swing traders can hold positions for days, weeks, or even months. The strategies employed by day traders involve more sophisticated indicators and precise entry/exit points.

Should You Swing or Day Trade: The article concludes with a discussion of the pros and cons of swing trading and day trading. Swing traders can get started without capital requirements, but profits accumulate slowly over time. Day traders can potentially make money every day, but the path to success requires substantial time, money, and constant attention. The decision between the two depends on individual goals, risk tolerance, and available resources.

In conclusion, my expertise in stock trading allows me to provide a comprehensive analysis of the concepts presented in the article, offering valuable insights into the world of swing trading and day trading.

Swing Trading vs. Day Trading: What’s the Difference? - Benzinga Pro (2024)
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