When it comes to picking trading strategies, it usually all comes down to making a choice between day trading and swing trading, which are some of the most popular trading mechanisms.
As far as the choice concerned, traders who are looking to earn some profit, in the long run, would rather go for swing trading while those who are looking for short-term instant gains are usually turning to day trading as their favorite strategy of choice.
While day trading requires a certain level of knowledge in trading, like chart systems and market analysis, while preferably demanding trading experience and swing trading requires extensive researching and high margin requirements, both strategies have ups and downs to it.
That is why we are analyzing both strategies, presenting you with both, pros and cons of day trading and swing trading.
Day Trading Strategy Explained: Pros and Cons
Day trading is a trading strategy that involves earning profits on a daily basis while utilizing specific charts and embracing the power of a solid market analysis. Day traders are usually scoring on daily stock losses and market dips, managing to spin the market trend to their advantage.
- Potential Daily Profiting – what makes day trading extremely attractive to traders is the fact that this strategy allows a daily By trading with multiple stocks at the same time, a day trader never keeps his investments still overnight but spins the profit during the day. Of course, one has to possess a certain level of knowledge and preferably experience in addition, in order to be able to achieve sustainable profits on a daily basis.
- You won’t get bored – although it may sound a bit unprofessional, boredom and lack of motivation can ruin all effort of creating a sustainable business that trading should represent. One of the pros of day trading is the fact that as a day trader you are less likely to get bored, as you will be measuring your experience, knowledge, and skills against the market currents every day.
- Independence – in case you are into day trading as a business, you will most certainly enjoy the independence as you are your own boss and you can manage your trades under your own supervision. This is an especially benevolent factor in case you are a knowledgeable and experienced trader with a solid trading portfolio.
- High Stress – high stress is, like it or not, a great part of day trading. This is the case because a trader involved in this strategy has to be able to observe multiple trading opportunities at the same time while making crucial decisions in a split of a second.
- Ongoing costs – there are many costs to cover as a day trader in order to be able to compete with multi-million traders and hedge funds that are using massive funds to turn the market in their
- High Risk – in case a trader is not capable of making prompt decisions on multiple trades in order to earn a profit while being immune to all the stress and high risk the day trading comes with, day trading will bring instant losses instead of daily profit.
Swing Trading Strategy Explained: Pros and Cons
Swing trading is less likely to turn into a career as it is impossible to make this strategy into a full-time profit maker. This is the case because swing trading requires trading and investing based on swings in the market and offered commodities over a course of several days or weeks.
- Longer timeframe – since swing trading requires making decisions based on the analysis that takes place from several days to several weeks, a trader does not need to be at the computer observing charts all the time, making it a great profit on the side.
- Minimized Stress – since a swing trader doesn’t need to make swift decisions, most of the stress is out of the frame with this strategy. However, in order to be able to profit from swing trading, you still need to be able to analyze the market and make your trades based on extensive research.
- Profit in the Long Run – while day traders usually enter and exit one trade multiple times a day in order to turn some profit, swing traders can take days and even weeks in order to wait for the prices to jump before they make a trade.
- High margins – unlike day trading, margin requirements for swing trading are significantly higher, allowing you to trade with a maximal leverage two times the capital. This is because swing trading involves holding stocks overnight.
- Risk – this is a part of any trading session as usually there is a single decision between profiting and losing your investment. Since stocks with swing trading are held overnight, the risk of losing your investment during the time your stocks are unmonitored can carry a risk of losing on a larger scale.
Day Trading or Swing Trading?
There is not an actual way of telling that one of these strategies are better than the other as they all have their ups and downs. However, the best way to decide which strategy to use when trading is to focus on determining your qualities and requirements as a trader.
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