Swing Trading vs Day Trading | Advanced Forex Strategies

Swing Trading vs Day Trading

Swing Trading vs Day Trading

Swing Trading vs Day Trading

How I became a Consistently Profitable Trader!

Are you interested in trading the forex market but don’t know which of the two styles — swing trading or day trading — to take? Or maybe you just want to understand the major difference between the two styles? While day traders try to capture the various price moves during the day and don’t keep their trades beyond that day, swing traders want to milk the short-term trends which may last from a few days to a couple of weeks. Here we’ll discuss the risks, startup cost, time commitment, stress, and mindset involved with the two styles.

What are the Risks?

There are risks associated with both styles of trading. In swing trading, a trade can last for several days or weeks. Every night (especially weekends) that trade is exposed to the risk of overnight gaps and the stop loss can’t protect it. In addition, at any given lot size, you risk a greater dollar amount per trade in swing trading than in day trading. This is due to the naturally larger stops used in swing trading.

On the other hand, excessive leverage in day trading can put one into debt very fast. Day traders often use much leverage — trading with the broker’s money — trying to make more profit. But it is a doubled edged sword as they can lose much more and even blow their accounts as the market can move very fast and unpredictably.

Strategy used by Legendary Traders

Which one has more Startup Cost?

The startup cost for trading the forex market can generally be grouped into three — the cost of getting a computer or laptop, the cost of a reliable internet connection, and the trading capital.

Computer/laptop: Whichever style you trade, swing or day trading, you are going to make use of a computer or laptop. So the cost is the same for both styles.

Internet: If you must trade, you must have a stable and reliable internet connection irrespective of the style you’re trading. However, for day trading, you will need your system on, all through the trading period. This may translate to a higher data consumption overall but most internet plans are based on duration rather than overall data consumption. So, the cost is the same for both styles.

Trading capital: You will definitely need a bigger trading capital for swing trading. This is because of the larger stop loss required in swing trading. While you can comfortably day-trade a $500 capital using the micro-lot, you can’t start swing trading with that amount without risking more than 1 percent of your account per trade which is very risky especially for swing traders that hold trades overnight.

 

What’s the Time Commitment?

Day trading involves using lower timeframes such as the hourly, 30-minute, 15-minute, and even the 5-minute timeframes. This automatically implies more time in front of the screen, constantly monitoring the market for setups and managing ongoing trades. This requires a huge time commitment and can be very stressful. In fact, day trading is a full-time job and cannot be combined with any other job.

Swing trading, on the other hand, involves time frames that are much longer such as the daily and four-hourly timeframes and so you don’t need to watch the market as frequently as day traders do. In addition, you hold your trades for several days or weeks giving you enough breathing space. You can easily trade the forex market part-time using swing trading style and still retain your full-time job. Swing trading is ideal for those that want to benefit from the forex market without giving up their other career.

Swing Trading vs Day Trading

Swing Trading vs Day Trading

How Stressful?

As a result of the lower timeframes employed and the need to constantly monitor your trades, day trading can be very stressful. It requires a lot of mental energy, decisiveness, and discipline which are not always easy to maintain. The stress can even lead to burnout if it is not managed properly.

On the other hand, swing trading is a lot less stressful. You don’t need to analyze the market all the time and don’t have to trade all the time. Even ongoing trades are monitored on higher timeframes such that you may only check the market once or twice a day. It is quite easy to combine swing trading with your full-time job.

What about the mindset?

The mindset, emotions, and personality required for both styles are a bit different. While patience is very necessary for both types of traders, a swing trader needs to have bucket-full of it so as not to micromanage trades or even enter trades prematurely. It takes a lot of patience to wait for days or weeks for a trade to complete or a setup to appear.

Conclusion

Both swing trading and day trading styles can be employed profitably in the forex market. It is a question of an individual’s preference and personal circumstances. You should choose the one that suits your situation and stick to it.


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