Both day trading and swing trading are active trading practices which require different strategies, techniques, tools and money management. Both day traders and swing traders usually trade in higher volumes with in short time periods for small price changes; and the processes are really fast. Here is a comparison between day trading and swing trading.
- Day trading is the most active form of trading and is faster than swing trading; day trader completes a number of trades with in the same trading day, while swing traders complete trades after days or weeks.
- Day traders look for very small price changes and swing traders for reasonably high price changes. Thus day traders earn less profit per share.
- With day trading, there is no overnight risk, but swing trading involves overnight risk of holding open positions.
- Day traders usually make full use of marginal trading to maximize their position sizes; swing traders, because of overnight risks, utilizes lesser margins from brokers.
- Day traders typically get much less time to respond to market swings; swing traders can plan for more profitable trades using technical analysis and trend predicting/confirming tools.
- Day trading, because of more number of trades, usually involves higher commission rates compared to swing trading.
- Day trading requires much more market attention in trading hours, and automated trading systems to find a trading opportunity.
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