Swing Trading vs Day Trading & What Are the Differences?

Swing trading vs day trading, what’s one to do? Is one better than the other? There’s pros and cons to both. And actually, you don’t need to pick just one. You can do both like me! Sometimes my life gets busy and I can only swing trade. At other times, I can slip away for an hour and place a day trade. So let’s jump in and I’ll show you how it’s done. 

What Are the Differences Between Swing Trading vs Day Trading

  1. Here are the differences between swing trading vs day trading:
  2. Day traders: in and out of trades within same day, usually less than a minute.
  3. Swing traders: in trades for several days up to several weeks.
  4. Time Commitment: day trading requires more daily commitment.
  5. Start up costs: more computer hardware needed with day trading.
  6. Need to have at least $25,000 in an account to avoid pdt rule as a day trader.
  7. Stress: day trading is more stressful because trading decisions need to be quicker.
  8. Brokers: limitations on brokers to short with day trading.
  9. Brokers: most brokers are good for basic swing trading.
  10. Risk management: important for both trading strategies.

It’s important to know the difference between swing trading vs day trading. Not to beat a dead horse but as I mentioned in a few other posts, day trading is where you buy and sell stocks in the same day. You do not hold any stocks over night. Again, there are many different types of stocks.

A huge focus for day traders is technical analysis. You hope to capitalize on shifts in momentum and hop on the train when the time is right. Done correctly and you will see gains.

Pros: Day Trading

  • The potential to make huge profits. One need not look further than to Instagram or the stories of 20-year-olds making $10k plus days. The lure of big money is what draws many to day trading. However, this is not reality. Money can be made but only with the right approach with the right strategies.
  • Freedom from the 9 to 5. Personally, my goal in life is to have freedom from the 9 to 5. Day trading is a means of doing this. You have no boss but yourself and this is one of the reasons people are drawn to trading.
  • Price to learn is affordable. It doesn’t cost much to learn. In fact, at Bullish Bears, we have $3,000 + worth of free courses on our website. Pretty cool right?
  • No glass ceiling. Gender, race, education, upbringing, marital status, hair color, it doesn’t matter. Seriously, anyone with passion, desire, perseverance,  discipline and patience can succeed at day trading.

Cons: Swing Trading vs Day Trading

  • The potential for huge losses. Think margin, need I say more? It stands to reason, if an opportunity has a huge potential for wins, there can also be a huge potential for losses. But, this doesn’t have to be the case if you simply follow sound risk management principles. Make sure to know how low float stocks creates volatility.
  • Startup and ongoing costs. Like every good craftsman, you need to invest in the right tools for your trade. A pro skier with 10-year old skis… you get the point.
  • No consistent pay. Some days you just don’t make a trade. And this is perfectly normal. In fact, many pro traders don’t trade daily. You need to be ok with this. A simple solution, don’t quit your day job right away.
  • Can be stressful. The ability to quickly identify and act on trading opportunities when they present themselves can be stressful. Watching screens for hours on end taxes even the best of us. But, this always doesn’t have to be the case. Even if you just pick an hour of the day when the market moves (i.e. first thing or during the end of day power hour) you can be successful day trading.

When it comes to swing trading vs day trading swing trading is a completely different ball game than day trading is. You need to rely not only on technical analysis but fundamental analysis since you hold overnight. Generally, you hold for a period of time, from one day to a few weeks.

Pros: Swing Trading vs Day Trading

  • The potential to make huge profits. Just like day trading, swing trading can be lucrative. In some cases, the stock just needs to take the time, say a few weeks, to work itself out. The Bullish Bears offers real time swing trade alerts under their stock alert page.
  • Less time commitment. And time is what you have with swing trading. Due to the different trading approach, you don’t have to be glued to your computer screen every day. You can even maintain a full-time job which you trade. Just limit the amount of time you spend checking your charts at work, haha.
  • Less stress and chance for burnout. You don’t need to be glued to your computer looking for entries and exits.
  • Expensive equipment and data subscription fees not required. A simple laptop will do and the net has lots of free resources for stock information. I’m a fan of FINVIZ because of their free screeners.

Cons: Swing Trading

  • The potential for huge losses. Holding trades longer can also work against the swing trader. You need to take into account external factors that influence the market and can happen after hours. Take a comment by an “influencer”. This can impact the market. Even a severe weather event or political tensions can impact the market in swing trading vs day trading.
  • Higher margin requirements. Generally, maximum leverage is two times one’s capital. Compare this with day trading where margins are four times one’s capital. This is because positions are held overnight with swing trading.

The Risk of Margin Trading

Swing Trading vs Day Trading

Where things go sideways for many in day trading vs swing trading is using margin or “borrowed money” to trade (check out our stock basics page).

A lot of day traders generally use margin (borrowed money) to trade. Typically, day traders can borrow up to 4 times the amount of cash they’re deposited into their account. So, while this gives them more money and thus more potential to make a profit, they can also lose much more.

On the other hand, for those who hold positions overnight, think swing traders, it is generally limited to 2x (watch us do trading live each day in our trading rooms).

Is Swing Trading Safer Than Day Trading?

  • Swing trading is typically a safer strategy than day trading, however, that’s not always the case. Day trading requires you to make split second trading decisions, which could cause traders to mess up more. On the other hand, day traders aren’t in their positions as long as swing traders, which doesn’t open them up to potential black swan events.

Interest Fairy: Swing Trading vs Day Trading

swing trading vs day trading

Think of swing trading vs day trading like this. Imagine you have a credit card with a $5,000 limit. The phone call comes,  “you’re pre-approved for a credit limit increase to $10,000”.

Suddenly you think of the new trip you can take, gosh, you do work hard, you deserve it. I know you have all been in this situation. You jump on the offer.

Fast forward 4 weeks, your statement arrives in the mail. Well, now your new balance is $9,000 thanks to the all-inclusive trip to Jamaica at an annual interest rate of 19%.

Let’s say you commit to paying $200 a month. If you do the math, it will take you about six and a half years to pay off the credit card. Total Interest Cost Until Payoff is $6,870.34  the monthly interest alone is minimum monthly payments @19%.

Here’s a nifty calculator to determine interest on your credit card.

I’m sure by now you see this hole you’ve dug for yourself and the same applies to trading on margin.

In fact, you have to pay interest on the money “borrowed” from your broker. Just like you would pay on the money “borrowed” from your credit card company. Here’s a handy article from Investopedia that explains how interest is calculated on margin accounts.

Moral of the story, do not accept the credit increase and be wary of margin. In fact, cut up your credit card all together.

How to Lose More Than Your Initial Investment

In swing trading vs day trading you can actually lose MORE than your initial investment when trading on margin. Huh? What? Yep. You can. Unfortunately, margin trading can amplify gains as well as losses. 

Here’s how it is possible to lose more than 100% of your investment in margin trading. Let’s say you have a $10,000 cash account for example. If you have a margin account you have access to an extra $10,000. This means you have $20,000 to trade with.

But, this money isn’t free. The interest fairy will visit you! And you get to pay interest on it at a hefty fee of $425.

Nonetheless, you go ahead and enter a trade with the full $20,000, purchasing all the shares you can.

If, for whatever reason the stock plunges to zero.  So that means in addition to losing your entire $10,000 investment, you’re on the hook to your brokerage for $10,000 and the additional $425 in interest. All in, your total loss is $20,425.

Biggest Mistakes: Swing Trading vs. Day Trading

When you lose at day trading on margin, you lose hugely.  Stocks can move fast and the inexperienced can lose money fast.

In my honest opinion, the biggest mistake new traders make is using margin to trade. Essentially this equates to gambling. Moral of the story, do not trade on margin until you’re a seasoned pro.

Swing trading doesn’t rely so heavily on margin (you don’t have to use it if you don’t want to), so you don’t have to worry about winding up in debt.  

That doesn’t mean swing trading is risk free (far from it), but there are relatively less opportunities to lose money based on the risk management rules I teach.

Make sure you know risk management for swing trading vs day trading.

Which Is More Profitable Scalping or Swing Trading?

  • Which is more profitable scalping or swing trading? Both are profitable trading strategies. If you’re a consistent scalper then you could make as much more or more than a swing trader if you stick to your daily trading plan. It’s typically easier to scalp small gains daily though than it is to get bigger gains as a swing trader.

Timing Your Moves

It won’t take you long to figure out the market “moves” at certain times of the day. And this is when there is money is to be made in swing trading vs day trading.

From when the market opens at 9:30 a.m. until around 11:30 a.m. EST, is when the market will have the most trading volume and also the most volatility. This means lots of buyers and sellers which means that you can easily get in and out of traders. 

I’d be remiss not to mention “power hour” or end of day trading

These are the best times for momentum traders to trade! 

Day trading requires a bigger time commitment. Since day traders change positions at such small intervals (1-minute, 3-minute, 15-minute, etc.) they have to constantly monitor their positions to make sure they’re still in a profitable place.

That is why a lot of people that day trade do so as a full-time job, either as part of a corporate institution or independently.

Time Commitment: Swing Trading vs. Day Trading

Swing trading uses time frames that are much longer – you generally hold your securities for several days and or weeks. You still have to make sure that you’re in a favorable position, but you have some breathing room.

It’s entirely possible to profit from swing trading on a part-time basis while holding down a full-time job in something else. This flexibility makes it a great option for people who want to learn how to trade profitably without devoting their entire lives to it.

Take, for example, the single mom who works a full-time, Monday to Friday job. She does not have the luxury to watch charts for set-ups in the am, she has to work. Because of this, swing trading  would be a good choice for her!

Hence knowing swing trading vs day trading.

Start up Cost Differences

Day traders need a fast and flawless order execution platform and broker as their entry and exits are literally often only one or two seconds apart.

People often wonder how you do it so fast? The answer is: cutting edge trading platforms with a direct-access broker at your fingertips. I won’t get into all the nitty-gritty details but, you can find a break down of what it all means on our blog post DAS Trader.

And like most things in life,  if you want the cream of the crop, you need to pay for it. This includes data fees, the software itself and the hardware (i.e. computer) that is powerful enough to run the software.

Luckily, once you invest in the proper hardware the rest is easy. Personally, once I saved up for my laptop, I was off to the races.

We really like the Thinkorswim trading platform and its free! All you need to pay for is the live data fees. What’s more, with a Bullish Bears membership, you get free access to the live TradeIdeas stream. Alone this is upwards of $2,000 a year.

Meanwhile, swing trading can be done on an individual basis for relatively little startup money. In order to begin swing trading, all you need is a standard computer/laptop and conventional trading tools are all you need to begin swing trading.  There are many free sites where research can be done.

Stress Levels: Swing Trading vs. Day Trading

As you can probably tell by this point, day trading can be stressful. Why? Because in a lot of cases you’re monitoring your positions on a minute-to-minute basis. 

One must be disciplined, decisive, and have more than a basic understanding of the markets. After all, you’re going up against corporate finance professionals who make their livings off of this.

What’s great about swing trading is that with some studying, even those with no knowledge in finance can be successful. 

Please don’t misunderstand me. It’s not necessarily “easier,” and there are definitely pitfalls to trading in general.

Don’t Be a Gambler

Not to rain on anyone’s parade but, trading can put you into debt – fast. The reason many traders fail out of the gates is because they don’t put the time in upfront to build a solid foundation of knowledge and skills.  You might as well head to the slots in Vegas. I’m serious. You’ll be gambling.

We teach all of this to our members.

The Bottom Line

Every trader or aspiring trader is different. There’s not a one size fits all approach to a style that is going to work best for you. If you’re not ready to commit to trading full time, swing trading is generally the better and less riskier option.

For those of you who are interested in trading but don’t have a strong background in finance and work a full time job, your best bet is swing trading.

I hope this has cleared up the confusion. Luckily, Bullish Bears can teach how to make profitable swing trading decisions so you’re not gambling. 

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