Key Differences Between Swing and Day Trading

Key Differences Between Swing and Day TradingIf you’re interested in financial trading, you might have come across the concepts of swing trading and day trading. Even though both are valid approaches, there are at least five relevant differences between these two popular styles. It’s essential to examine the main differences between the two if you want to better understand them.

How do they differ? For starters, swing and day trading enthusiasts hold their assets for varying amounts of time. Plus, each one uses leverage differently, takes on more or less risk, uses unique sets of tools, and works contrasting schedules. Here’s a closer look at what each one of these trading methods entails.

Holding Times

Day trading is based on the concept of never holding a security overnight, hence the name. Each session is closed out by selling all holdings and going to 100 percent cash in the brokerage account. That’s not true for swing positions, which typically remain open for several market sessions or as long as a week. There are multiple reasons that people opt for longer or shorter holding times, but the main one is that overnight risk is zero for day traders, as noted below. However, swing trades do not require constant monitoring, nor do they require large capital outlays.


A key distinction between day and swing positions is the amount of leverage. While it’s not a hard and fast rule, day trading typically sees more leveraged transactions compared to other trading styles, to try and exploit small movements in the market more effectively.


Anyone closing out their positions before the end of the trading session has no risk of holding a security overnight. That means they can wake up the next morning and not have to worry that their portfolio took a hit in the overnight markets. On the other hand, swing traders nearly always have multiple day holds, which exposes them to overnight price action. While the threat of overnight value changes can take a toll, day trading exposes investors to high volatility within each session. That’s because short-term price action can make a huge difference in a position that’s only open for a few minutes. It’s fair to say that each kind of trader has his own version of risk.


Another important difference is related to the kinds of tools traders use to evaluate opportunities. Day traders often use technical charts and focus on pivots and various moving average lines to make buying and selling decisions. For those with longer timeframes, it’s often more helpful to use a combination of technical indicators and fundamental analysis. If you’re planning to hold a security for two or three sessions, for example, patterns like the famous head and shoulders can come in very handy.

Time Commitment

If you choose to become a day trader, it’s best to engage in the activity full-time. For others, who don’t feel the need to close each session by going to cash, work can be part-time because there’s no need for constant price-watching and position monitoring.


Both trading styles can be applied to a range of assets such as forex, stocks, or crypto. However as we’ve discussed above, day trading and swing trading have certain differences that you should bear in mind when considering which method to use. It’s also the case that market conditions for a particular asset class might favor one style over the other at any given time, and it’s your call to use whichever you choose. Make sure you research your chosen markets as much as possible before choosing a trading style, to maximize your chances of success.

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