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Swing Trading vs Day Trading; The Differences

The two most popular trading styles for stocks and other securities are swing trading and day trading. They’re similar in that both involve buying and selling stocks within a relatively short period of time (usually within one day), but the goal of each is different.

If you want to learn more about swing and day trading, you can get more information at VantagePointTrading. Let’s check out the differences between these two approaches to investing based on these factors;

·         Trading Frequency

·         Number of Transactions

·         Insider information

·         Market indices

·         Payments and commissions

·         Trading costs

·         Confirmation bias

·         Acceptance of risk

·         Stability

Trading Frequency

A major difference as stated by thebalance is that day traders open and close several positions within a single day whereas swing traders only take trades that last multiple days, weeks, or even months. Day trading is the process of executing trades during the day as opposed to swing trading which is executed during a market correction. Day traders find their opportunities and place orders for trades in advance. This tactic allows them to take advantage of volatility and execute multiple trades during volatile conditions, which can be lucrative if it is done correctly.

Since you need to constantly monitor your portfolio and react accordingly, day traders often trade much more than swing traders do.

Market indices

Swing traders are constantly monitoring the performance of the market, in order to ensure that they are trading at the exact levels that the market is at. However, this is not necessary for day traders who can watch their portfolios and overall stock performance during trading hours. This allows day traders to utilize more of their time by focusing on trades over a longer period of time. Stock To Trade confirms that a swing trader will buy at the market’s close and then hold overnight. Swing traders do need to bear in mind that their portfolios and overall stock performance will be more volatile than their day trading counterparts because they will be buying and selling on a more frequent basis.

Payments and commissions

Swing traders often benefit from reduced commissions and higher volume discounts, which can make it easier to build up a portfolio. Day traders, on the other hand, will buy and sell stocks throughout the day, which will result in larger commissions for each trade. Investopedia clearly stated that brokers and investment advisors will often charge clients commissions for using their services

Trading costs

Usually, swing trading is more time consuming than day trading since the trader needs to spend a longer period of time monitoring the market and be aware of fluctuations in stock prices. Swing traders also have to spend a lot of time building up a portfolio and maintaining it. Day trading does not necessarily mean that a trader will have no expenses, but it does mean that they can be minimized through commission discounts from brokers. The advantage of day trading, however, is that the trader needs to do very little work to maintain their portfolio.

Confirmation bias

Swing traders tend to be more set in their ways and will not accept advice from others or change their positions as a result of other people’s opinions. Day traders, on the other hand, utilize a wide range of tips and information to increase their chances of success. The use of confirmation bias increases the likelihood that swing traders will miss out on the market as a whole as they focus only on minute-to-minute fluctuations and the stocks that they are trading currently.

Acceptance of risk

A swing trader’s main aim is to make as much profit as they can on the stock that they are currently trading. Therefore, if that stock goes against them, then the swing trader will cut their losses quickly and look for another investment. A Day Trader, on the other hand, accepts the fact that they will make some mistakes along the way and will continue to stay in a trade even if it is making them lose money. They do this because day traders want higher gains over a longer period of time with less risk of losing money on one particular trade. According to Investopedia, risk is usually assessed by considering historical behaviors and outcomes.

Stability

Swing trading is not as stable as day trading since it is based on taking quick profits from one stock. Day trading, on the other hand, will ensure that you are constantly making money throughout the day, since they will be making numerous trades over a longer period of time. This means that they are less likely to suffer big losses during their trading career. Swing traders may also find it more difficult to find employment with large institutions because there are fewer opportunities for swing traders in comparison to day traders who can work for institutions or companies that need them for longer periods of time.

Final words

In order to have a successful swing trading or day trading strategy, traders will need to first learn the fundamentals of how to trade stocks and/or shares successfully. Without a clearly defined strategy, a trader will be overwhelmed by the amount of information at their disposal and it is very easy for them to lose money as a result.

Although it is possible for an individual trader to become successful at both swing trading and day trading, there are enough differences between the two that it makes sense for them to take each one separately.

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Vulcan Post aims to be the knowledge hub of Singapore and Malaysia.

© 2021 GRVTY Media Pte. Ltd.
(UEN 201431998C.)

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