Swing Trading vs Day Trading

Whether you're into stocks, forex, commodities or crypto, there are plenty of methods and strategies available to help you to home in on profits.

Two of the most popular types of trading are swing trading and day trading, but how do they differ? How are they similar? Which has better profitability? And which should you choose for your portfolio?

What are swing trading and day trading?

Swing trading involves making trades based on identified and predicted medium-term swings in the value of currencies, stocks, commodities and other securities. Trades are held open for a few days to a few weeks. Swing trades are commonly performed 'on the side' – having a full-time career swing trading is rare.

Day trading is remarkably similar to swing trading, except that positions are only left open for a few hours at a time. Day traders complete multiple trades throughout the day, taking small profits each time which, together, amount to larger sums.

Swing trading vs day trading: key differences

There are several key differences between swing trading and day trading:

• Position timing – The main difference between swing and day trading is that swing trade positions are held open for longer. Swing trades run from a few days to several weeks, while day trades occur within the space of a few hours.
• Overnight trading – Day traders will never hold open a position overnight, while swing traders will. These inter-day trades will invite overnight fees, which will slightly impact profits and losses.
• Frequency of trading – Swing trading involves making fewer trades over a longer period. Day traders, on the other hand, will make multiple trades within the daily trading period. As a result, day trading can invite higher trading fees, affecting profit and loss.
• Concentration required – Day trading requires higher levels of concentration than swing trading. That's because day traders are more reliant on factors like technical indicators and fast-moving fundamentals to execute their trades, while swing traders focus on the longer term.
• Trading method – Day trades typically lean on the heavy use of trading software to view technical indicators, while swing trades can be conducted through a brokerage account, with analysis conducted elsewhere.
• Size of trade – Day trading involves making many small trades (often following the 1% rule where only 1% of total capital is invested in any single trade). Swing trades are often larger.

Swing trading vs day trading: benefits and risks

Swing trading benefits

There are lots of reasons why swing trading can be advantageous versus day trading. First, because trades take place over a longer period, swing traders don't need to pay attention to the markets constantly. If you're a swing trader, you can happily keep your day job.

Next, stop-loss orders can prevent swing traders from accruing huge losses when they're not looking at their account. This can automate the process, saving more time and protecting gains.

Due to being a longer-term form of trading, swing trading can be less influenced by emotions. Traders are less liable to be caught up in the trading conditions of the moment and are therefore less likely to make the wrong move acting on fear or greed.

Finally, per-trade profits can be larger with swing trades, particularly if the trader times their position well to take advantage of a significant swing in price. Of course, this applies to losses, too.

Swing trading risks

The main downside of swing trading is that trades can take a while to come to fruition. This results in your capital being tied up in a trade for a potentially lengthy period. That means that it'll be open to changing, potentially turbulent market conditions for longer.

That means higher long-term risk of losing money, especially since the amount invested can be larger than other forms of trading. This is dependent on market conditions, of course.

Lastly, if you're looking for an exciting, fast and furious form of trading, then swing trading probably won't be for you. It requires less focus and more long-term strategic thinking.

Day trading benefits

Day trading is a quick and thrilling type of trading well suited to risk-lovers.

It offers the ability to rack up profits quicker versus swing trading too, which can be good for traders wanting to make a quick profit. This is helped by compounding – as the trader takes profit, they can open a larger position, take profit from that, then continue with positions and profits growing ever larger.

With day trading, capital is never tied up in individual stocks for more than a few hours, either, so you can take advantage of different opportunities quicker.

Lastly, day traders don't need to pay overnight trading fees since they only trade in the day and close their positions before the trading period ends.

Day trading risks

The main disadvantage of day trading is that it requires levels of concentration which many people won't be able to give the activity alongside their employment. Trades are executed based on news and technical analysis – miss a beat and days' worth of profits might be wiped out.

A second downside is that, by executing multiple trades throughout the day, day traders can invite a greater number of trading fees and commissions. Together these can affect profitability.

Lastly, a lack of overnight trading means that day traders lose all exposure to overnight events which might add to their profits.

Swing trading vs day trading: which is more profitable?

Profitability in swing and day trading entirely comes down to luck, skill and strategy – the latter two of which are completely up to you. If you work on your skills and develop smart ways of trading, you may see improved profits. However, it should be considered that both swing trading and day trading are subject to high risk of making losses.

That said, there are some factors that can lead to swing or day trades being more profitable versus one another:

• Swing trades can see higher profitability per trade, given that positions are open longer.
• Day trades can lead to higher cumulative gains, as profits compound over time.
• Day traders can often access higher levels of margin, increasing the size of profits due to opening larger positions.
• If you are risk-averse, day trading may lead to reduced profits given that you may be more susceptible to negative emotions like fear and greed.
• If you love speed and risk, swing trading might not be for you as you might feel the urge to close your position when a longer period might have resulted in potential profits.

Swing trade and day trade today with Tradu

At Tradu we have the necessary tools and resources that you need to swing or day trade. Check out our guides below to grow your expertise, then sign up for a live trading account online and execute your first trades. Listed stocks or CFDs on Crypto, forex, indices – no matter what you're trading, we're with you every step of the way.

Trading guide

What is day trading

What is swing trading

With Tradu you can trade crypto via CFDs.