Trality has been discontinued as of 31.7.2023. Thank you to all our users 💙.
Trality has been discontinued as of 31.7.2023. Thank you to all our users 💙.
Trality has been discontinued as of 31.7.2023. Thank you to all our users 💙.
Trality has been discontinued as of 31.7.2023. Thank you to all our users 💙.

Day Trading vs Swing Trading: Which Strategy is Better?


04 January 20239 min read

Table of contents

Is swing trading better than day trading? Is it more profitable to swing trade or day trade? Is swing trading safer than day trading? Is swing trading or day trading better for beginners? There are countless questions to consider when deciding whether one trading strategy or a combination of trading strategies might work for you, but a few key insights can go a long way.

In trading, the asset price is never linear. No matter how prolonged, all trends are always punctuated with a series of fluctuations resulting in price pullbacks. These pullbacks can be short-term or long-term, and the resulting volatility is the basis for day trading and swing trading.

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In the following guide, we’ll cover some of the main elements of day trading and swing trading, including their benefits and drawbacks, before considering which of the two is the more profitable trading strategy.

What Is Day Trading?

Day trading involves opening and closing multiple trades throughout the day, with none remaining open overnight. Day traders strive to take advantage of even the slightest of price fluctuations and market volatility, and in this respect share some similarities with arbitrage traders (although the two are different). Usually, they focus on shorter timeframes to identify optimal entries and exits. The primary goal here is to scoop as many pips as possible from several short-term trades, usually using higher leverage.

BTC, Bitcoin, day trading, crypto, 30 minute chart
Day trading Bitcoin (BTC) on a 30-minute chart, with a pennant pattern signaling a trend break before continuation. (Source: FXTradingRevolution)

As a result, day traders rely heavily on technical analysis. Typically, day trading is time intensive. Unless day trading strategies are automated with trading bots, traders may be glued to their screens to actively manage their positions in real time. They rarely take economic fundamentals into account since their true impact could take longer to be priced into an asset’s value.

Benefits and Drawbacks of Day Trading

Day trading has a high turnover and can be ideal for exploiting short-term daily market volatility. But this rapid turnover has its advantages and disadvantages. The following are some of the pros and cons of day trading.

Benefits of day trading

  1. Diminished risk exposure: Day traders are not exposed to systematic risks, especially those associated with economic news and geopolitics, nor do their positions remain open overnight.
  2. Potential for quick profits: Since they exit their positions at the end of each trading day, day traders can take advantage of short-term price movements, which can yield quick profits.
  3. Increased control: Having the power to choose when to enter and exit trades often gives a sense of control over one’s trading decisions rather than having them dictated by external factors.
  4. Quick reaction time to current events: The news cycle and current events can have a discernible impact on cryptocurrencies, and day traders are poised to leverage that news to capitalize on possible market movements.
  5. Diversification: If you’re interested in diversifying your portfolio beyond crypto, then day trading can be used to trade a wide variety of assets (e.g., stocks, futures, etc.).

Drawbacks of day trading

  1. Higher risk: Because it involves trading within a relatively short period of time, day trading can carry a higher level of risk, as prices can move against a trader and result in significant losses.
  2. Short-term focus: Day traders are focused on short-term price movements and may miss out on longer-term trends, making it difficult for some to generate consistent profits.
  3. Time-consuming: Since traders need to constantly monitor the market and their trader entries and exits, day trading can be a time-consuming process. If you’re looking for a relatively stress-free trading strategy, or if you have other commitments on your time, then you should explore alternatives.
  4. Limited profits: Depending on which cryptocurrencies are being traded, there is the potential for limited profits, as the price of some coins might not move significantly throughout the course of a single trading day (despite crypto’s notorious volatility).
  5. Trading costs: Costs and fees from making multiple trades each day can quickly add up, resulting in a significant stumbling block for day traders looking to generate a positive return on their investment.

What Is Swing Trading?

Swing trading is a trading strategy that involves holding a particular position for longer periods (i.e., days or even weeks). As we’ve mentioned, asset prices never develop in a linear trend. Even in a prolonged bullish or bearish period, the trends are often punctuated by instances of short-term price pullbacks. These pullbacks observed in established trends are called price swings. Swing traders simply observe an already established market, then anticipate the price pullbacks. And this is precisely where the ability to read crypto charts proves to be an absolutely essential skill.

swing trading, crypto chart
Crypto chart illustrating swing trading

Essentially, swing trading is based on two primary strategies: trend trading and breakout trading. In trend trading, the swing trader tries to take advantage of the persistent price trend of an asset. Breakout trading is the opposite of trend trading. In breakout trading, the swing trader tries to detect chart signals that indicate that a price is breaking out of its normal trading range. Usually, this is the case when a critical support or resistance line is broken. Unfortunately, though, it simply isn’t possible to anticipate the highs and lows of a swing movement with full certainty.

Benefits and Drawbacks of Swing Trading

Swing trading can be an ideal source of passive income for traders, but it is not without its advantages and disadvantages. Below are some of the pros and cons of swing trading.

Benefits of swing trading

  1. Beginner-friendly: Swing trading is suitable for both beginners and experienced traders since it doesn’t require intense, real-time intense technical analysis (unlike day trading).
  2. Potentially larger profits: With positions being held for longer periods of time, swing traders can possibly benefit from larger price movements (and thus bigger profits).
  3. Less time-consuming: The longer periods of time also mean that swing traders can afford to spend less time monitoring their positions (unlike day traders).
  4. Lower costs: Swing traders incur lower transaction costs compared to day traders since they open fewer trades.
  5. There’s less market noise in swing trading, meaning that swing trading is not susceptible to intraday whipsaws (i.e. the longer timeframe allows market sentiment and fundamentals to be priced in).

Drawbacks of swing trading

  1. Overnight gaps: An unexpected market event or geopolitical development could instantaneously reverse the market and wipe out the accrued gains, resulting in bigger losses, especially if such events or developments occur overnight.
  2. Short-term price fluctuations: While swing traders aim to profit from longer-term price trends, short-term price fluctuations can still impact their profits, with rollover fees an additional factor to bear in mind.
  3. Limited trading opportunities: Because swing traders hold positions for a longer period of time, there may be fewer trading opportunities compared to day trading.
  4. Higher capital requirement: Swing trading typically requires a larger amount of capital than day trading. And since your capital is locked up for a longer period, you cannot rotate your capital as freely as you would in day trading.
  5. Emotional decision-making: Holding positions for a longer period of time can lead to emotional decision-making, as traders may become attached to their positions and find it difficult to exit when it is no longer profitable. The obvious solutions: selecting the best indicators for swing trading and using automated trading bots.

Key Differences between Day Trading and Swing Trading

Swing trading, at least in theory, shares a number of similarities with day trading. However, both have significant differences. Here are a few of those differences to consider.

Risk exposure

Swing traders are exposed to systemic risks since their trades remain open for days or even weeks. During this period, geopolitical developments and high-impact economic news could significantly impact the asset’s price.

Day traders, on the other hand, are unlikely to be impacted by systemic risks. Their trades never remain open overnight, and, in most cases, trades will last only a few minutes or seconds.

Frequency of trades

Day traders execute multiple trades, often with multiple assets, within a day. This approach is designed to take advantage of small price fluctuations throughout the day. Conversely, swing traders usually have a single trade that can stay active for weeks.

Trade monitoring

Day trading requires your full attention during trading hours. Essentially, you should think of it as a full-time job. Day traders must monitor their trades in real-time to guarantee optimal trade entries and trade exits, which obviously depend on their trading strategies. And owing to the sheer number of trades executed, most day traders tend to automate their trading.

Swing traders do not suffer under the burden of having to monitor their trades constantly. Since they hold their positions somewhere between a few days to weeks, they don’t have to worry about short-term market volatility. In most cases, they simply set their profit and stop loss targets and only monitor them occasionally.

Margin and leverage

There are certain differences between margin trading and leverage trading, and these differences can have an impact on whether a trader decides to choose day trading or swing trading. Day traders have lower margin requirements primarily because they combine high-turnover trading strategies with high leverage. Swing traders, on the other hand, use lower leverage to minimize risk exposure since their positions are open for longer, meaning that the margin requirements in swing trading are higher.

Which is More Profitable: Day Trading or Swing Trading?

Whichever trading strategy you prefer, profitability will depend on your skills in fundamental analysis and technical analysis.

A case can be made, however, that day trading offers a path to making more short-term profits since day traders execute multiple trades within a single day. And although small price fluctuations are the target, these fluctuations can and do add up.

On the other hand, since swing traders keep their positions open for longer periods of time, there’s a high probability of earning more pips from the market (hence more profit from a single trade).

Another key point: certain personality types are better suited to certain trading strategies. Day trading offers an adrenaline-filled, fast-paced trading environment. Swing trading, on the other hand, can be more methodical and slower paced.

However, that’s not to say that one is inherently better or more profitable than the other. No trading strategy is foolproof and no strategy can ever offer a one-size-fits-all approach to trading profitably.

Getting Started with Day Trading and Swing Trading

When getting started with day trading and swing trading, you need to tick the basics first. Know the market terrain; know how Python trading bots can increase your profits while reducing your risk; and know yourself (i.e., your skill level, experience, expertise, risk tolerance, and personality type).

The next step necessarily involves selecting the most convenient trading platform for your preferred assets. In the wake of the FTX implosion as well as recent revelations of API key leaks, you’ll want to choose a safe, secure, and trusted platform such as Trality.

In terms of day trading specifically, you’ll need to familiarize yourself with proper technical analysis techniques. You should know which technical indicator setup works best under specific timeframes. Usually, day traders rely heavily on trend and momentum indicators. In addition, you should only start trading once you have well-defined entry and exit strategies. You’ll also want to automate your day trading strategies.

When it comes to swing trading, the approach should be rather straightforward.  Observe an already-established market and then anticipate price pullbacks within the crypto market’s cycles. Here, your focus should be on price points in the market at which a reversal is more likely, and you open or close your trades within these price ranges. For example, in an uptrend, you intend to buy from these price lows and close the trade at the swing high. When the general trend is bearish, you short the market when the prices are high and close the trade at the swing low.

And, finally, a point worth mentioning again: whichever trading style you use, always implement a stop-loss order to limit your downside in case of extreme volatility. Remember that the crypto market will always have unexpected spikes of volatility, which may increase the chances of a loss.

Final Thoughts on Day Trading vs Swing Trading

At this point, you should be well aware of day trading and swing trading in terms of 1) what they are, 2) how they differ, 3) their respective advantages and disadvantages, and 4) how to start day trading and/or swing trading yourself.

But let’s say that you’re still on the fence about which strategy to implement (if either of the two). Consider the following questions:

  • Do you intend to trade full-time or part-time?
  • How much capital do you have and what are your short- and longer-term financial goals?
  • What’s your risk profile?
  • What’s your trading psychology?

With day trading, you must have the mental fortitude to cope with the fast-paced, intense daily trading with real-time monitoring. With swing trading, you need a thick skin and the mental fortitude to ride out short-term fluctuations.

Whichever you choose, always remember the golden rules of investing: ALWAYS do your own research and NEVER risk more than you can afford to lose.