Day Trading vs Swing Trading

5paisa Research Team

Last Updated: 24 Apr, 2024 12:46 AM IST


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The stock market is filled with investors and traders of many types. They employ various strategies and techniques to make a profit in the market. While some are extraordinarily successful, others struggle to get their investment back. 

Swing trading and day trading are the two most popular trading strategies seasoned investors employ to reap rich dividends. But, which would be more beneficial for you in the long run? This article simplifies the day trading vs swing trading debate for you to make profitable decisions.

Let us now delve deep into understanding what swing trading vs day trading is.

Day Trading Vs Swing Trading

Swing Trading vs Day Trading - A Comprehensive Review

Day Trading

Day or intraday trading is the umbrella term given to all trades that start and end within a business day. Day traders usually analyse the market trend and support and resistance levels of stock before entering. If the market is bullish, they place a buy trade in the morning, set a target, and sell when their investment objectives are fulfilled. Conversely, if the market is bearish, they place a sell trade first and track it during the day.

A day trader’s primary objective is to earn a living by trading stocks, currencies, commodities, exchange-traded funds, and the like. A day trader typically remains hooked on to the trading terminal from 9 AM to 3:30 PM. Day traders often enter into and exit from multiple trades with small profits. They also set a stop loss to reduce their losses if the trades go against their prediction. Since day traders close all their positions before 3:30 PM, they do not hold stocks overnight.

The U.S Securities and Exchange Commission (SEC) observes that most day traders receive a severe blow during the first few months of trading while some never recover their money. Hence, the SEC advises traders to be cautious while treading on the murky waters of intraday trading. It also suggests that investors must invest the money they will not mind losing. Unfortunately, most day traders trade with insane leverage, making them more prone to monumental losses. 

Hence, if you want to establish yourself as a successful day trader, stay away from the lure of easy money and invest time in researching stocks and other financial instruments. 5paisa can make your task easy with expert recommendations and comprehensive research reports about companies and the economy. You can access the research reports and expert recommendations with a free Demat and an online trading account.  

The Characteristics of Day Traders

Day traders usually work from the convenience of their homes. They can work anytime they want and take as many leaves as they want without answering anyone. However, when it comes to trading, a day trader has to compete with big financial institutions, high net worth investors, hedge funds, high-frequency traders, and auto-trading systems. Regarding technology, a day trader is automatically at a disadvantage against big traders. So, they often refer to stock recommendations released by reputed brokerage firms to make trading decisions.  

A day trader may go with the market trend or against it. While going with the market trend requires sharp observational skills, going against it requires breathtaking courage. Remember, day trading is a full-time job and might be hectic at times. However, proper research and the right support can help you face the task conveniently. And, in the swing trading vs day trading debate, aggressive traders always choose day trading.  

Now that you know what day trading is, let’s pull up the second candidate in the day trading vs swing trading debate - swing trading.

Swing Trading

Have you ever noticed how stock prices move? Yes, you are right. They move in waves. When the wave rises, it indicates bullish momentum, and when it falls, it indicates bearish momentum. Swing trading is identifying the peak or the lowest point of these waves and taking entry or exit to ride the entire wave. If the stock price is at its lowest point, you can buy and ride the bullish wave. Conversely, if the stock price is at its peak, you can sell and ride the bearish wave. However, the waves generally do not show when they will gather steam, a reason why swing traders use multiple signals and technical indicators to predict the movement.  

Unlike day trading, swing trading can range from a day to a few weeks or even a month. The wave depends on the time frame of the chart. For example, there might be multiple waves in a 5-minutes chart. In contrast, a day chart might have fewer but more pronounced waves. Hence, your swing trading strategy depends significantly on the time frame you choose.

The Characteristics of Swing Traders

While day traders generally trade for a living, swing traders might be full-time or part-time traders. The expertise needed for day trading is undoubtedly higher than swing trading. As a fact, almost any investor or trader with some capital can indulge in swing trading and make decent profits. 

Unlike a day trader, a swing trader does not need to sit in front of the terminal all day long. They can simply set the target, stop loss, and continue their everyday affairs. Swing traders working with margin are required to shell out something more than day traders if the positions are held overnight.

The EndNote

The day trading vs swing trading debate ends here with a clear verdict. Try day trading if you have lots of time and plenty of expertise in stocks. But, rely on swing trading if you are a novice investor or into a full-time job. Alternatively, you may create a strategy combining the best features of swing and day trading to make even bigger profits. 5paisa is with you on your journey to financial freedom with low-cost brokerage plans to maximise your profits.

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