Using day trading, a trader opens and closes multiple positions in a single day. On the other hand swing, traders take trades that last for days, weeks, and months.
Those two types of trading strategy suit traders depending on their capital, time, psychology and the market they trade-in.
Here are the advantages and disadvantages of both day trading and swing trading.
The potential return
Day trading can give trades compounding of returns. Imagine if a trader risks 0.5 percent of his capital on each trade. Thus, if he loses, he will lose 0.5 percent, but if he wins, he will make a 1 percent (2:1) ratio.
Then, if that trader wins 50 percent of six trades in a day, on average, means he adds about 1.5 to his account balance in a day. The number may seem easy to replicate for big returns, but there is nothing that easy.
Conversely, a swing trader takes a long time to accumulate gains and losses. Imagine a swing trader also risks 0.5 percent of his capital on each trade, with the same winning ratio of 2:1.
Then, the trader wins 1.5 percent for winning trades, losing 0.5 percent on losing trades. Within six trades per month and wins 50 percent of those trades. In a typical month, the swing trader could make 3 percent on his account balance.
In general, day trading offers more profit potential, especially for a smaller account. But, one the account size grows, it is harder to effectively utilize the capital.
Trading always requires, but day trading usually takes much more time. Day traders usually need at least two hours per day. Besides that length of time, they still need more preparation time and trading reviews.
In contrast, swing traders need much less time. For instance, if a swing trader off a daily chart could find new trades and update orders on current positions in about 45 minutes a night. These activities may not even be required on a nightly basis.
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Moreover, day traders need to do trading while the market is open and active. They are highly affected by the second-to-second changes in the price of an asset.
On the other hand, swing traders can look for trades or place orders at any time of day, even after the market has closed.