The two most widely employed trading techniques among traders in the financial markets are swing trading and day trading. The goal of both techniques is to profit from market price fluctuations that occur over the short period. However, each strategy has a very different approach. Here, in this article, we will delve deep into swing trading vs day trading to understand how each approach is distinct.
But first,before we delve into the swing trading vs day trading comparison, it is necessary to know what these terms mean. So, let’s begin by defining them and understanding the trading strategies.
What Is Swing Trading?
Swing trading is a type of trading in which traders maintain positions for several days to a few weeks to profit from a significant price swing over that period. This price swing is only a small price swing within a larger trend; however, it’s enough for an opportunistic swing trader to take home profits. This tactic often entails spotting stocks, currency pairs, or other assets that are exhibiting predictable price patterns between supports and resistances.
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What Is Day Trading?
On the other hand, day trading entails entering and closing positions on the same trading day. A day trader may buy and sell stocks, or other assets, several times a day in an effort to capitalise on quick changes in stock market prices. Day traders often search for stocks or other assets with high liquidity and volatility since these assets are more likely to see swift price changes within a single trading day.
Swing Trading Vs Day Trading : What are the Key Differences?
Let’s look at what are the major differences in swing trading and day trading with the help of the following table.
|Swing trading entails holding positions for a number of days to weeks.
|While in day trading, the trader takes positions and exits them on the same day.
|Therefore, swing trading involves the delivery of shares into the traders demat account.
|On the other hand, day trading does not involve any delivery into the traders demat account.
|Swing trading focuses on capturing brief price swings, which occurs with a larger trend.
Whereas day trading concentrates on capturing brief price changes during a single trading session.
|Since a swing trader holds positions for a longer period of time than a day trader, swing trading usually requires less capital than day trading.
Day trading calls for greater capital requirements since the trader often needs to trade in larger volumes to generate substantial profits.
|Since the trader plans on holding the position for at least a handful of days, they can buy and hold a handful of stocks simultaneously, which are spread across various sectors.
|A day trader, on the other hand, will look to hold fewer trades simultaneously since managing too many trades at once may be difficult when the holding period is too short. They will deploy larger chunks of capital in a single trade compared to swing traders.
|A swing trader depends on technical indicators like chart patterns, price trends, and other indicators. However, in addition to that, they may also refer to fundamental indicators and data.
|A day trader is likely to only refer to technical indicators like price patterns, price trends, and other indicators like the moving average.
|A swing trader generally chooses liquid stock, but may even choose some less liquid options based on their risk tolerance.
|Since they have to get in and out of positions on the same day, day traders only focus on highly liquid stocks.
|Swing trading is relatively considered less risky than day trading since trader’s can practise diversification and don’t need to make precise entries and exits.
|Day trading is considered more risky than swing trading since traders are dealing with high volatility and are deploying large chunks of their capital. However, since they exit the trade on the same day, there are no overnight risks.
|Since the trader only needs to check the market periodically throughout the day to look for potential trade setups, swing trading needs to be less time commitment than day trading.
Day traders must devote a substantial amount of time—especially if they look at it as a full-time job—since they continuously monitor the market.
|Since swing trading involves a delivery it is subjected to regular brokerage fees, as well as the depository participant (DP) charges.
|Since there is no delivery involved, intraday trading is subject to a special intraday brokerage rate and is also not subjected to any DP charges.
Which Strategy Is Right For You?
Your own trading preferences and objectives will determine whether you should engage in swing trading or day trading. Swing trading could be a better option if you have full-time work or other obligations because it demands less time commitment. However, day trading might be a more profitable option if you are committed to trading and have the time and assets to dedicate to it—that said, even if you’re fully dedicated , don’t just quit your day job to start day trading without testing market waters. It’s best to gradually start day trading and make it a full-time thing only once you're sure it's a profitable venture for you.
There are benefits and drawbacks to both swing trading and day trading. It's critical to comprehend the differences between these two trading approaches so that you may select the one that most closely matches your goals, risk tolerance, and trading style. Whatever trading strategy you decide on, it is imperative that you have a strong trading plan in place and are disciplined in your approach. Additionally, if you are new to trading and need help understanding it, you may check out the user-friendly blinkX trading app, which provides online support and direction.
Swing Trading Vs Day Trading FAQs
Since swing trading requires less time commitment and carries lower risk than day trading, it might be a better choice for beginners. Both tactics, though, necessitate a thorough knowledge of market assessment and risk management.
A swing trader may not see it essential to study the most minute details of the business since they do not intend on holding the stock for months. Hence, they can evaluate stocks fundamentally by assessing its PE ratio, ROE, ROCE, profit margins, debt-to-equity ratio, and other such metrics. They could also keep an eye on the results as well as macroeconomic developments.
Both swing traders and day traders may use technical indicators like the moving average, RSI, and stochastic oscillators.
Day traders refer to day charts that generally display 2-minute, 5-minute, or 15-minute candlestick charts.
Day trading and swing trading can be profitable depending on a number of variables, including market circumstances, the particular assets being traded, and the trader's knowledge and expertise. So, one method is not better than the other in terms of profitability.