In this post, we will talk about day trading vs swing trading, two of the most popular investment strategies. You will see that day trading consists of the buy and sale of financial assets during the same day, while swing trading consists of the purchase and sale of financial assets for more than a day. We will show you strategies, tips, indicators and you will find some action when you see examples of how to use technical indicators in the case of each of these strategies. Take into account that regardless of the investment strategy you choose, you must make a trading plan so that you can exploit your profits to the maximum.
Similarly, we suggest that you complement your investment decisions with the help of experts. If you are an investor or are considering investing your capital, you need to complement your strategies with expert financial advisory services. In this way, you will be able to make better decisions, choose the best balance between risk capital and structure profitable investment plans. In this sense, we believe that Capitalist Exploits is a good alternative, especially for beginners in the world of trading. Its new “themes” approach and its high value, low-risk recommendations offer a great alternative for both experienced traders and beginners. For these reasons, we recommend Capitalist Exploits.
#1 What Is Trading
Trading is the buying and selling of financial assets that are listed on the financial markets. The main objective of the trade is to obtain economic benefits and to achieve this, different investment strategies are used. In this article, we will talk about two of the most popular trading strategies so that you have all the elements you need at hand to make the best and most profitable investment decisions. The first thing to keep in mind before looking at our research about daily trading vs swing trading is the elements that are present in the market when you trade.
Factors Relevant To Trade
There are a couple of elements that could influence asset prices when you work as a trader. The most important ones that you should take into account are:
- Market liquidity is important because it shows how easily and quickly you can enter and exit positions.
- Volatility is the speed with which the price moves. If high volatility is expected during the day, movements can create many profit opportunities. You can take advantage of volatility when you encounter many price rises and falls during your work session.
- Volume is a measure of how many times assets are bought or sold in a given period. The high trading volume shows a lot of interest and is useful for identifying entry and exit points.
#2 What Is Day Trading
Day trading consists of the purchase and sale of financial assets during the same day. That is, at the end of each day you must close all positions. You can make this type of short-term investment in different markets:
- Raw Materials
This type of strategy requires doing a lot of buying and selling negotiations throughout each day. In general, the earnings of each of the positions are not very high. Even so, it is possible to get meaningful returns thanks to the number of transactions. An attractive factor of this technique is that at the end of each day it is possible to determine the profit or loss that has been obtained. The methodology with the day trading strategy to open and close positions consists of making an exhaustive technical analysis. Take into account that the technical analysis consists of determining the price of financial assets from the trend or pattern analysis. Later we will show you a section dedicated to the different types of technical analysis indicators and you will even see a couple of examples.
#3 What Is Swing Trading
Swing trading consists of the purchase and sale of financial assets but unlike day trading, the swing trading investment strategy is medium-term. In other words, traders keep financial assets for more than a day, generally holding their positions for two to four weeks.
In swing trading, buying and selling decisions are also made based on in-depth technical analysis. Also, because this investment strategy takes more than a day, swing traders support their buying and selling decisions with information from the markets. For example, news about the economy, the evolution of industries, or events such as wars or trade restrictions from specific countries.
Keep in mind that with these types of strategies you may forget to follow the evolution of your assets. For this reason, swing traders use stop loss to avoid loss and get target profits. A stop loss is nothing more than a buy or sale order that you leave programmed in your broker. In this way, the platform executes orders to take advantage of, for example, a rise in prices at the moment before it falls.
#4 Criteria For Choosing The Type Of Trading Strategies
For you to choose the best option between day trading vs. swing trading, you must test a series of factors so that you can determine which strategy best suits your personality and with which one you feel most comfortable.
Different styles of trading require different periods of time. That is why you must be aware of how much time you really dedicate to trading so that you can choose the strategy that best suits your lifestyle.
The shorter the operating time, the less money you will need to achieve a significant gross profit.
The trading profession in general, is a risky activity in which you can earn or lose money. It is important that you define how much money you are willing to put at risk.
It is important to determine which characteristics of your personality are adapted to each strategy to achieve better performance.
#5 Day Trading Vs Swing Trading: Indicators
It is not enough to see the evolution of prices for you to make buying or selling decisions. It is also necessary that you do a technical analysis that allows you to find the best opportunities. In this section, we will tell you about the indicators most used by traders. We will also show you examples so you can see how technical indicators are used to make investment decisions.
The Most Common Types Of Indicators
Traders make their decisions based on technical indicators. Below you will see the most common:
MACD – Moving Average Convergence/Divergence
This indicator has the function of identifying changes in the trend and direction of prices. It consists of the evolution of two moving averages with different periodicity to determine patterns of changes.
RSI – Relative Strength Index
RSI determines if the market is overbought or oversold. The analysis is very important to establish whether there will be a reversal in the price trend. The index works with exponential averages. If the RSI is above 70, the market is overbought, but if, on the contrary, the indicator is below 30, the market is oversold.
ATR – Average True Range
The indicator takes into account the closing price of the previous day with an exponential average, and depending on the market trend (bullish or bearish), it subtracts the high or low of the current day from the closing price of the previous day.
SMA – Simple Moving Average
They are ideal for smoothing price data series and making identifying the direction of trends easier, which is especially useful in volatile markets.
It consists of two standard deviation lines, which indicate support and resistance levels. If the price touches any of these bands there is a possibility that the trend will suddenly change.
#6 Day Trading Vs Swing Trading: Examples
Now it’s time for the action. We will show you a general example and specific examples of each of these great strategies so that you have a look at the world of trading. We recommend that you structure a good trading plan to help you make the most of the opportunities. In this day trading vs swing trading post, you will also find a section dedicated to the trading plan and tips you will use to help you improve your strategies.
In the following graph, you can see the use of several of these indicators (SMA, trends). You should consider that it is possible to use more than one indicator at the same time so you can analyze the best moments to buy or sell financial assets. The moving averages of 20, 50 and 200 show the trajectory of the prices in the short, medium and long term. Keep in mind that as all moving averages take the same direction, prices will tend to go up or down. This type of trajectory indicates a clear idea of the direction of prices. Also, in the lower part of the graph, you will be able to see the volumes traded (green bars for sale and red bars for buy) that indicates if the market, in general, is selling or buying.
Day Trading Example
In this example, you will see the importance of buy and sell signals during a day so that you can get the most out of your day trading strategy. The Moving Average Convergence/Divergence (MACD) indicator is analyzed to identify the trajectory of the price trend, which is a generator of buy and sell signals to predict market movement.
The MACD is made up of the evolution of two moving averages of different lengths. The white line is made up of 12 periods and the blue line of 26 periods. When the moving average of 12 cuts the moving average of 26 upward, there is a buy signal, while when it cuts downward, there is a sell signal. In this sense, 4 relevant buy and 3 sell signals are observed throughout the analysis period.
Swing Trading Example
In the following example, you will see that determining the trend in which the prices will move is important for swing traders. Starting from the 20-day Bollinger Bands with a standard deviation of 2 (pink lines), an upward trend is observed, suggesting that since the band standard deviations represent support and resistance lines, in this case, prices have tended to break resistance. Furthermore, as long as the prices meet an uptrend hitting the ceiling of the Bollinger Bands you will be faced with a signal that you should wait to sell. By the time the quotes start to drop and stick to the bottom band you will have a clear sell signal.
#7 Day Trading Vs Swing Trading In A Box
Throughout this article, we have presented you with several very relevant factors when choosing the best strategy that suits your goals. Below we will present a summary table of all the most relevant elements you need to know to choose one of these two wonderful strategies.
|Characteristics||Day Trading||Swing Trading|
|Investment duration||The positions have hour ranges.||The positions have week ranges.|
|Dedication||Full time. The day trader must be aware second by second of what happens to the asset quotes.||Part-time. Swing traders can make use of stop loss to program buy and sell moments.|
|Volatility||A key factor for decision making. It can be used to generate great benefits. But you have to be careful with losses.||A less decisive factor than in day trading because there is enough time to analyze market movements.|
|Trend||Trends in the short term have more patterns of change.||Medium-term trends are more marked.|
|Number of operations||Number of operations in day trading is higher due to volatility and the short period of time.||In the medium term, fewer operations are more common.|
|Stop loss||Used by the day trader to mitigate losses in specific cases.||It is a fundamental tool to mitigate losses. It is possible to program the maximum loss.|
#8 Do You Need Expert Help?
Definitely yes! Take into account that you should always analyze to make the best decision. In this sense, you should complement your investment ideas with the recommendations of a qualified advisor. We suggest our post “Capitalist Exploits: A Measured Approach To Achieving Asymmetric Returns“. There you will learn much more about investing and get great recommendations.
Below you can see a summary table with the main features of Capitalist Exploits:
|How do they select investments?||Capitalist Exploits seeks investment opportunities worldwide through in-depth analysis, market research, and investment networks. |
The team looks for the best investment opportunities in different sectors, industries and global markets.
Then they determine if the opportunity can be safely seized. After identifying opportunities, they estimate the risk associated with each investment to select the best risk-capital ratio.
The next step is to identify the most appropriate way to allocate capital in each scenario. In this way, investors can adapt to possible changes.
|Are the recommendations diversified?||They provide a high level of diversification because Capitalist Exploits seeks investment opportunities worldwide in and out of the stock market.|
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|Do they generate free content?||Yes, the company offers free content and a blog with highly relevant podcasts and opinion pieces. Capitalist Exploits also offers a private Telegram channel called “Hedgies Uncut”. There, hedge fund managers discuss their investment positions and ideas.|
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Summarizing Day Trading Vs Swing Trading
- Trading is the buy and sale of financial assets listed on financial markets to obtain economic benefits.
- Day trading consists of the buy and sale of financial assets during the same day.
- Swing trading consists of the buy and sale of financial assets for more than one day, usually more than a week.
- It is not enough to see the evolution of prices for you to make buying or selling decisions. It is also necessary that you do a technical analysis that allows you to find the best opportunities.
- When conducting trading operations it is essential to carry out an overview and a procedure to develop the strategy.
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