Which Strategy Suits You: Day Trading Or Swing Trading

May 4, 2013
By Vlad Karpel


There are two types of trading that gives the investor control over their investment according to their investment goals. An investor can decide whether to use swing trading and day trading. Each type has advantages and disadvantages.

Day Trading

Day trading is any investing position where the trader opens and closes the trade within one trading day. For most brokers, a trader need a minimum balance of $25,000.00 to open a day trading account. If the balance slips below the minimum, the day trading account and status will be forfeited and the trader will be limited to 3 round trip “day trades” every 5 days. If this rule is broken and the trader executes a 4th day trade in your 5 day period, the broker can lock or disable the trading account for a specified number of days.

The second consideration for day trading is the amount of time needed to execute the trade. A substantial amount of time is needed to study and analyze market trends in order to make better trades. You can susbcribe to trading platforms which provides trading picks in order to focus on executing the trade. A trade has to be timely in order to be successful. Some trading signals providers give the security with the timeframe which the trade has to occur to be profitable.

The biggest advantage to day trading is that the trade position is free from the risk of the market movements after the closing bell. Negative news and sentiment can prosper overnight and the stock can drastically dive due to the news. In day trading, the position is closed at the end of the day. Therefore, there is the movement of the market can be fairly predicted compared to longer timeframes.

Another advantage of day trading is the higher frequency of trading. Within the day, a day trader can open as many positions and close them at the closing bell. However, this could led to a disadvantage. When day trading, higher frequencies of trades can quickly sum up to expensive commissions to the broker. It is better to choose the broker with lower commissions without compromising the quality of service. The problem with some of the discount brokers is that their software is usually old, lacking features or both. If a trader pays for trading signals, it can be costly but the returns will pay for itself. Tradespoon provides winning stocks and option picks everyday with a very impressive profit record.

Swing Trading

Swing trading is a trade that is usually held anywhere from 1 to 10 days but depending on the strategy. There are times when it’s better to keep some of the trade open and follow just under the trend with your stop order. The first advantage of swing trading is that it requires a much lower minimum account balance as low as $500 to get started. As long as you have the buying power in your account to execute the trade, you can place the order. This is the sometimes the best reason why investors choose swing trading over day trading.

Another advantage to swing trading is that it requires less time and effort. It’s very likely the trades in swing trading is less than in day trading in any given day. At the start of the week, the trader can open 15 to 20 positions. It will take time to arrive at exit positions or add another trade. Moreover, there are much lower commission expenses as a there are less frequent trading compared to day trading.

The single biggest disadvantage to swing trading is having to hold the position overnight and exposing yourself to the risk of negative news while the market is closed. This is one reason why you’re average position size compared to your account size will be much lower with swing trading than with day trading. A great way for reducing the risk of being exposed to overnight news is by having a larger number of swing trades diversified across multiple sectors with smaller position sizes.


For occasional traders, swing trading is a good choice. It requires less investment with more time to study the market movement. Day trading is relatively more profitable but it requires at least $25,000. If you want to be a day trader, build your account using a solid swing trading strategy while you focus on actively day trading on a virtual account while you learn. You can earn the money you need for day trading status while using swing trading strategy. Also, your experience and speed will be helpful in becoming a successful day trader.

For smarter trades, sign up on Tradespoon today!

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