Day Trading vs. Swing Trading
Day Trading vs. Swing trading is a topic on which every trader thinks over it in his trading career. The Trader is in a dilemma, which one should be chosen. Which one is suitable for you? Let’s first take a look at each style. The following is based on the assumption that you follow the idiom cut losers and ride winners
- Very little risk due to not holding positions overnight
- Easy and quick entries and exits
- No need to worry about long-term general trends
- Much smaller profits than swing trading
- A very accurate system is required
- Not good for people who have a day job.
Pros 1 and 2 are very easy to understand.
For pro 3, I believe we do not need to worry about the long-term trend of a position that you are day trading because we try to capture small moves for a day position. If a stock is in a long-term uptrend, the probability that it will retrace at a certain point it is over 99% since all stocks zig and zag. When it shows any signs of aging, you can fade its intra-day. It is the same when a stock is in a downtrend.
- Bigger profits
- No need for a very accurate system
- Suitable for everyone, lawyers, doctors, policemen, you, me and your neighbor
- More risk due to holding positions overnight
- A lot of your positions might die since they require much bigger moves
Pro 1 is true since I always believe that your risk and reward is mathematically proportional. If you take a bigger risk, you MIGHT have a bigger reward.
Pro 2. I explained in this post (Probability and Risk/Reward Ratio) that you will still make money even if the accuracy of your system is below 50%.