Swing Trading vs Day Trading - Which Setup is Right for You? (2024)

Forex Day Trading vs Swing Trading

If you’re thinking of getting into trading but don’t know which path to take, don’t fret, we’re here to help.

When we take a look at most active traders, we see them grouped into one of these two categories, day or swing. And while there are some similarities between day traders and swing traders, as their shared pursuit of short-term movements, the two are quite different and it’s worth spelling out these differences.

Forex Day Trading

The broad definition of day trading is Short Term Trading. Scalping is an aggressive variation of day trading. It shares a similar concept for the act of making dozens of trades in a day based on technical analysis and charting systems.

Click here to watch our scalping workshop

In this pursuit, the main goal of the day trader is usually to make a living from trading by making small profits on numerous trades. In general, day traders bank small profits fast, exploiting short impulsive movements of the market, and do not hold positions overnight.

Many traders are drawn to day trading with the dream of making windfall profits. But as we’ve outlined many times before, it takes an incredible amount of work combined with the inherent skill to cut it as a profitable trader.

The reality is most traders who set out as day traders are going to incur losses during their first few months of trading. An even harder reality to accept is that many new traders will never actually turn a profit.

Let’s take a look at what day traders deal with:

Freedom

On the positive side, the day trader works alone, free from corporate restraints, and is free to trade when, how, and where he/she likes.

Competition

In the grind of trading, day traders must battle against hedge funds, high-frequency traders, and others willing to spend millions in order to gain a competitive edge. This is why it’s imperative for a day trader to invest heavily in equipment such as a dedicated computer, a state-of-the-art trading platform, etc.

Financial Commitment

If you don’t have the money to initially invest, perhaps day trading is not the best fit for you. To really put yourself on the path towards success, you need to devote yourself to day trading as a full-time job. This means quitting your day job and sacrificing whatever steady income you may have had before. As a day trader, you’ll need to depend on your skills as a trader to bring the bread home.

More Stressors

In addition to the financial obligations, day trading is highly stressful because, in order to succeed, one needs to constantly be observing multiple screens in order to find opportunities to quickly exploit. This is a daily fight with few breaks afforded to regroup. Many day traders burn out and simply lose the drive to maintain this incredible focus.

Equal Opportunity

One of the best parts of day trading is that there are no high academic or curriculum vitae hurdles to jump. The profession is open to anyone with the right equipment. There is no pandering to an employer or padding your resume to get a chance to sit at the table. This doesn’t mean that education is unimportant though, as every trader should always be pursuing more knowledge related to the field.

Now that we’ve laid out day trading’s pluses and minuses, let’s take a look at swing trading.

Forex Swing Trading

Swing trading on the other hand –

In a nutshell, swing trading is trading based on identifying swings. Swing trades usually occur over the course of several days and it rides over long market cycles. Riding on the big waves of the market can be in commodities, currency, whatever. In contrast with day trading, these trades may take up to several weeks to pan out. Unlike the day trader, the swing trader is not engaging in these trades dozens of times a day, every day.

Break from the Screen

While day traders are fixed on their screens, since swing trades take a longer time to develop, swing traders are free from the digital attachment. This also allows swing traders to take on other work unrelated to trading in order to supplement or even act as their main source of income.

It may lead to fewer swing traders suffering the type of burnout that is common amongst day traders.

Lower Leverage

Due to the longer length with which swing trades are held, margin requirements are higher. While margins are typically four times one’s capital in day trading, swing trading margins tend to max out at two times one’s capital.

In addition to this lower leverage, the swing trader can also set stop losses as part of a further effort to avoid constant monitoring and screen time.

Big Risk, Big Reward

While we noted that day traders can face big losses, this is even more true for swing traders. This is one of the consequences of holding onto positions longer.

Here is a special swing trading webinar by Yaniv Elbaz – From Naked chart to fully dressed using supply and demand

Swing Trading vs Day Trading – The Rundown

These two types of trading are distinctly different and ultimately, whichever path you choose to pursue needs to be based on your strengths.

Let’s say you don’t love being on your computer all day. Is day trading right for you? Probably not. Or maybe you want to be more flexible and only trade in your free time for extra income. Then swing trading is probably more suited to your lifestyle.

As with everything, weigh the pros and the cons, research, and hopefully reach a conclusion that will work best for you and your way of life.

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