Day Trading vs. Swing Trading

Day Trading vs. Swing Trading

day trading vs. swing trading

If you are unaware about the day and swing trader, then read this post first.

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

Day Trading

Pros:

  • Very little risk due to not holding positions overnight
  • Easy and quick entries and exits
  • No need to worry about long-term general trends

 

Cons:

  • 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.

Swing  Trading

Pros:

  1. Bigger profits
  2. No need for a very accurate system
  3. Suitable for everyone,  lawyers, doctors, policemen, you, me and your neighbor

Cons:

  1. More risk due to holding positions overnight
  2. 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%.

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