Swing Trading vs. Day Trading: What's the Difference?

The stock market is filled with investors seeking to cultivate maximum returns. While placing their trades, investors may create multiple strategies and go through different types of analysis to generate higher profits. Swing trading and day trading are one of the most popular strategies for making short-term profitable investments. Let us understand in detail how these strategies work and analyse the critical elements of swing trading vs day trading.

Day Trading

Day trading is an umbrella term for all trades where investors initiate and close their positions on the same day. Day trading is typically done to capture small price movements in highly liquid asset classes such as stocks and currencies. It requires extensive research and implementation of various technical tools such as moving averages, Bollinger bands and oscillators to analyse price trends and market movements. While day trading can result in substantial profits, it can also result in monumental losses for investors. Therefore, it is recommended that traders conduct proper research and do their due diligence along with the use of a stop-loss order to protect their investments.

Swing Trading

Swing trading is typically carried out to make profits from short-term trends. Swing trading positions are often left open for a few days and can go up to several weeks if the potential seems lucrative. Swing trading includes identifying waves of bullish and bearish trends in advance. If traders identify the right entry point, they can ride an entire wave and make immense profits. However, identifying the entry points may be complex and requires implementing fundamental and technical stock analysis to seek maximum profits. Traders implement strategies to benefit from swing trading, such as Fibonacci retracements, support and resistance triggers, channel trading, 10- and 20- day simple moving averages, and MACD crossovers.

Key Differences Between Swing Trading Vs Day Trading

Here is a study of the critical features of intraday vs swing trading.

Features

Day Trading

Swing Trading

Time Horizon Day trading comprises a shorter time horizon. Swing trading seeks to capitalise on trends, which may take up to several weeks.
Frequency Day trading requires placing multiple trades throughout the day. Swing trading requires fewer transactions.
Leverage The leverage in intraday may typically be four times the initial investment. The leverage in swing trading is around two times the invested capital.
Margin Requirement In day trading, the margin requirement is low. Swing trading requires a higher margin.
Risk Day trading involves a lower risk since the traders close their positions the trading day ends. In the case of swing trading, the positions are left open overnight, which increases the riskiness.
How to Trade You need high-end trading software and a complete set-up to practise day trading. A brokerage account is sufficient to facilitate swing trading.

Swing Vs Day Trading: Which Is Better?

Day trading and swing trading - both strategies help traders cultivate profits. However, both have pros and cons, and traders must decide carefully before selecting a suitable strategy based on their requirements. Day trading requires continuous monitoring of the investment during the trading session. Traders seek to exploit all the available profit-making opportunities during the day. Thus, they must constantly monitor all their open positions. Since swing trading uses an extended time frame, it can be done without constant involvement. Part-time traders are likelier to practise swing trading, whereas full-time traders may prefer day trading as their core strategy. Since swing trading is spread throughout a more extensive timeframe, traders may identify price trends to minimise losses.

On the other hand, day trading requires traders to be very careful since they do not have much time to follow trends and must take quick actions to minimise losses. However, the risk may depend on various situations. Since the trader's position remains open overnight in case of swing trading, they are exposed to a greater risk than day trading, where traders close their positions before the markets close. Day trading benefits investors with a large corpus of funds willing to take more significant risks. Moreover, day trading also requires you to be experienced with a thorough understanding of the markets. Day traders must understand profit potential and place a trade quickly to gather profits. However, swing trading gives some time to traders to evaluate the trends and make a decision. As a trader, you must understand both strategies thoroughly to analyse which would work best for you.

Comparing Returns

Day trading allows a small decision window for traders, thereby increasing the risk factor. Traders might find opportunities to gather more substantial profits using day trading. However, a crucial determinant of gathering returns through swing trading is understanding the right entry point. If traders can place their trade on the right entry point, they may ride a bullish wave and gather monumental returns. However, finding such entry points might require a lot of diligence and expertise.

Advantages of Swing Trading vs Day Trading

Swing trading can be an excellent tool to gain some extra profits. Here are some of the key benefits of using swing trading vs intraday.

Features

Day Trading

Swing Trading

Involvement Day trading requires you to monitor the markets continuously and make decisions quickly. Therefore, it requires a high level of involvement. Swing trading does not require a high-level involvement.
Research Day traders must place orders quickly, which may give them little time to conduct proper research. You have sufficient time to conduct your diligence while using the swing trading strategy.
Trend Day traders do not have the option to wait for a new trend. They must analyse entry and exit points quickly to make profits and safeguard themselves from potential losses. Swing trading allows you to wait for a suitable period for the trend to kick in. Traders betting on bullish patterns may continue to hold their positions during a bearish market, hoping for a trend reversal.

Conclusion

Swing and day trading is becoming increasingly popular among the numerous strategies to enhance investment portfolios. Both approaches have a particular element of risk involved. Traders must carefully understand these approaches and assess the associated risk before selecting a strategy.

Open Demat & Trading Account

By continuing, I confirm that I have read and agree to the Terms & Conditions and Privacy Policy.