Day Trading versus Swing Trading – Which is Better? | TradingSim (2024)

Day trading or swing trading that is the question.

If you are an active trader, day trading and swing trading will feel like second cousins. At the end of the day, both trading methodologies seek to make short-term profits based on price fluctuations in the market. In this article, I will provide 7 key differentials that will assist you in determining if one is better suited for your risk profile.

Day Trading

Day trading requires that you practically give your first born during trading hours. You’ll be hard press to even take a bathroom break. You are required to analyze the market each and every day and make quick decisions.

You will likely trade during specific time frames (e.g. morning or afternoon). There are the brave few who are able to trade all day and still turn a profit but let me tell you from experience the headaches from staring at the screen all day are excruciating.

Without a doubt when you are day trading you should not be multitasking with the television or talking on the phone.

Swing Trading

Swing trading at least allows you to take a breath.

While you still have to watch your stocks to ensure key levels are not breached, you do not have to hawk the tape like a mad person.

Without offending the swing traders of the world, I would dare to say you can swing trade on a part-time basis and still turn a profit. You may have fewer trade decisions to make, but you are expected to develop a thorough trading plan with entry and exit points.

#2 Per Trade Profit Expectations

Day Trading

Day trading is on a much smaller time frame. You are generally trading the 1-minute, 3-minute, 5-minute or 15-minute charts.

As a result of using smaller time frames, your profit expectations should be aligned with this approach.

I am of the belief that you need to make more than a few pennies per trade if you want to be successful over the long haul. Of course, there are high-frequency trading systems make thousands of trades per day only looking for pennies each way.

I get it; I get it, but remember the Tradingsim blog is for the everyday person looking to get into day trading who do not have access to MIT engineers. So, your profit targets should be sizable enough that your risk-reward ratios make sense and you can turn a healthy profit after commissions.

The one thing I want to make clear about day trading is that you should have a target in mind. With the number of price reversals in the market due to automated systems, you have to book your profits when your targets are hit. The odds of a stock trending hard in one direction for 3 or 4 hours straight may occur 20% of the time. You should aim to nail the other 80% that reverse on a dime.

Day Trading Chart Example

Below is a chart of Apple. Notice how the stock bounces around from peak to valley. There are times when stocks will trend pretty hard, but this is likely in the morning after reacting to some news event. For me personally, the morning is my preferred time to trade for that reason alone. But if you are going to day trade throughout the day, the price action in Apple below will be your likely scenario. So, don’t get cute, book your profits on a consistent basis and don’t worry about the home run trades.

Day Trading versus Swing Trading – Which is Better? | TradingSim (1)

Swing Trading

Swing trading provides for a much larger profit potential than day trading. On average you can shoot for a few percentage points all the way up to 20% and beyond.

Because your time frame for trading is larger your profit targets are also greater. This is where swing trading becomes fun. For example, you can have a set profit target, but because your holding period is much longer than day trading you actually can let your profits run a bit.

I like real-life examples, so here goes one. Below is a chart of FSLR over a 5-day trading period. The stock almost increased by a full 100%. As you can see in the chart, if you were day trading, you would have tried to time the swing points at A, B, C, D and E. In these rare cases the profit potential for swing trading is as sweet as they come.

Day Trading versus Swing Trading – Which is Better? | TradingSim (2)

#3 Number of Trades per Day

Day Trading

Day trading means you open and close trades during the same day. You could trade as few as once per day all the way up to a hundred or more trades. I am of the opinion that if you are manually trading, the more you trade, the greater chance you have of losing money over time. Therefore I only like to place 3 to 5 trades per day.

How many trades are you planning to execute on any given day?

Swing Trading

Swing Trading does not require you to place trades daily. Generally, trades are placed every 2 to 3 weeks. The lengthier time is because you need to provide the stock the ability to “swing” from one price point to the next. Now, there are times when a stock will just have a breakaway gap and you will, of course, hold off on the 2 to 3-week timeline and just let the stock run.

Day Trading versus Swing Trading – Which is Better? | TradingSim (3)

#4 Money Management

Day Trading

Day trading allows you to use up to 4 times youravailablecash to buy and sell securities. This means as a small-time trader with a 100k in capital you can now trade up to 400k during the day. I personally do not use all of the moneyavailablebecause of how great it increases my risk profile.

You are required to make quick decisions on how much money you will allocate per trade. This requires you to track how much of your money is in float and also have an understanding of the margin requirements of your brokerage firm.

Unlike you who are willing to risk your money quite freely, brokerage firms have specific maintenance requirements for some stocks based on theirvolatility. To read more about money management and day trading with margin check out one of our most popular articles: How to Day Trade with Margin.

Swing Trading

Swing trading allows you to trade with a maximum of two times your available cash. No matter what time frame or style of trading you prefer, the money management principles are the same:

  1. Never have too much money in one position
  2. Use margin sparingly
  3. Always have a stop loss open or at least in your mind of when you pull the trigger
  4. Take Money out of the market. If you never pull out money, it will never find its way to your wallet.

#5 Risks

Day Trading

Since everyone that reads Tradingsim knows I prefer day trading, I’m guessing you know what I’m going to say here. Day trading on the surface sounds riskier, but in actuality, day trading provides you far more control over your trading activity.

When I am in a position, I am literally in a position. I have my monitors going, time and sales streaming and are watching the stock go through its gyrations. This level of monitoring means I gain a feel for how hard the stock is trending and can quickly pull the trigger if things go to the left.

Where day trading gets riskier is when it comes to your money management principles covered under #4 above. Because you have more leverage there is a greater chance you can get yourself in trouble.

My golden ratio was to never use more than 10% of my available margin on any trade. As your account value increases in size and therefore your per trade profits, you should naturally reduce the amount of margin you use to improve your risk profile. That is unless greed gets a hold of you and you start to believe there is always more.

Swing Trading

Swing trading has the exact opposite risk profile. Since you have less margin to use per trade, this naturally reduces your risk; however, swing trades expose you to holding positions overnight.

For me, this introduces too much risk relative to day trading. Most news events such as earnings, public relations announcements or analyst recommendations occur outside of normal trading hours. I cannot risk waking up and seeing my stock has gapped down 20% from the previous days’ close.

Just writing that last sentence made my stomach turn.

#6 Instant Gratification

Day Trading

I like to do work around the house and in the yard when it comes to small jobs. When I say small, I’m talking about cutting the grass orchangingthe light bulb.

The reason being, I get an immediate sense of accomplishment. I set out to perform a task and I can quickly see the results of my efforts. This is another reason I am a fan of day trading. I can measure my performance on a daily basis. There is no ambiguity around how much I can make this month or quarter. I know each and every day whether I was a winner or not.

Swing Trading

Swing trading requires you to have more patience, which I clearly do not like to wait on things. You may hold your trade for a few days or 8 weeks. It really depends on how well the stock trends. The periods of time where it is unknown whether I will close the trade out with a profit increases myanxietylevels to a point outside of my comfort zone. Are you willing to hold positions for weeks or a few months?

Day Trading versus Swing Trading – Which is Better? | TradingSim (4)

#7 Startup Capital Required

Day Trading

I say this every article to make sure my readers understand this point clearly. You need starting capital of 50 to 1, cash to expenses to begin a career as a day trader. The only reason this rule bends at all is if you have supplemental income which you can use to offset your monthly expenses. Therefore, if you have 3k a month in bills, you need $150k cash to day trade. This sounds like a lot and it is. The end goal here is to ensure you are able to make it in day trading over the long haul and not go broke.

Swing Trading

Since you can swing trade and still hold down a full-time job, the amount of money required is really up to you and your own financial responsibilities. If you are planning on swing trading for a living I would say you need 100 to 1 cash to expenses. The reason for the increase is you may be in a trade for longer than one month and are unable to use trading profits to pay your living expenses. With this ratio you are only losing 1 percent of your trading capital per month in the event you are in a position a little longer than expected.

In Conclusion: Day Trading or Swing Trading

Whether you decide to day trade or swing trade really comes down to the following:

  1. Are you trading for a living?
  2. How much money do you have to trade?
  3. What is your appetite for risk?
  4. Are you an action junkie?

If you answer these questions truthfully and reread this article you will have your answer.

If after reading this article, you are still unable to make a decision on swing trading vs day trading, please visit We have a trading simulator that you can use to test drive both approaches until you know for sure which best fits your trading profile.

All the Best.

– Al

Photo Sources

Working from Home –ishane

Startup Capital Graph –Silent Solutions

Day Trading versus Swing Trading – Which is Better? | TradingSim (5)

I am a seasoned financial market enthusiast with a deep understanding of day trading and swing trading. My experience in actively trading various markets has given me valuable insights into the nuances of these two methodologies. I've successfully navigated the challenges and complexities associated with making short-term profits based on price fluctuations.

Now, let's dive into the key concepts discussed in the article about day trading and swing trading:

  1. Level of Effort Required:

    • Day Trading: Demands intense focus and continuous analysis throughout trading hours. Requires quick decision-making and minimal multitasking.
    • Swing Trading: Allows for a more relaxed approach, with the flexibility to trade on a part-time basis. Requires a thorough trading plan with defined entry and exit points.
  2. Per Trade Profit Expectations:

    • Day Trading: Involves smaller time frames (1-minute to 15-minute charts) with profit expectations aligned accordingly.
    • Swing Trading: Offers a larger profit potential, ranging from a few percentage points to 20% and beyond, due to a longer holding period.
  3. Number of Trades per Day:

    • Day Trading: Involves opening and closing trades within the same day, potentially ranging from a few to over a hundred trades.
    • Swing Trading: Typically requires fewer trades, with positions held for 2 to 3 weeks or longer.
  4. Money Management:

    • Day Trading: Allows using up to 4 times available cash for buying and selling securities, requiring quick decisions on trade allocation and understanding margin requirements.
    • Swing Trading: Limits trading with a maximum of two times available cash, emphasizing principles like diversification, setting stop-loss orders, and withdrawing profits.
  5. Risks:

    • Day Trading: Provides more control over trading activity but involves higher leverage, increasing the potential for risk. Monitoring is crucial to avoid pitfalls.
    • Swing Trading: Has a lower risk profile due to less margin usage per trade but exposes traders to overnight risk, especially during events like earnings announcements.
  6. Instant Gratification:

    • Day Trading: Offers a sense of immediate accomplishment with daily performance measurements.
    • Swing Trading: Requires patience, with trades held for days or weeks, leading to uncertainty about closing trades with a profit.
  7. Startup Capital Required:

    • Day Trading: Demands substantial starting capital (50 to 1 cash to expenses ratio) to sustain a day trading career. Supplemental income may offset monthly expenses.
    • Swing Trading: Allows flexibility in required capital, depending on individual financial responsibilities, with a suggested ratio of 100 to 1 cash to expenses for those trading for a living.

In conclusion, the choice between day trading and swing trading depends on factors such as trading goals, available capital, risk appetite, and preference for active or patient trading styles. Consider these aspects truthfully to determine the approach that best fits your trading profile. If undecided, utilizing a trading simulator can provide hands-on experience to make an informed decision.

Day Trading versus Swing Trading – Which is Better? | TradingSim (2024)


Day Trading versus Swing Trading – Which is Better? | TradingSim? ›

Swing trade positions have a better potential for larger gains and losses than day trade positions since they are generally open longer. Because each trading approach is unique, traders should select a strategy that suits their talents, interests, and lifestyle.

Is it better to be a day trader or swing trader? ›

Swing trading has lesser opening positions, but they drive greater profits as well as losses for traders. Unlike day traders, swing traders do not opt to gain massive profit from a single trade. It's because they open lesser positions, the transaction fees are also less compared to day traders.

Which type of trading is most profitable? ›

The defining feature of day trading is that traders do not hold positions overnight; instead, they seek to profit from short-term price movements occurring during the trading session.It can be considered one of the most profitable trading methods available to investors.

How much money do day traders with $10000 accounts make per day on average? ›

With a $10,000 account, a good day might bring in a five percent gain, which is $500. However, day traders also need to consider fixed costs such as commissions charged by brokers. These commissions can eat into profits, and day traders need to earn enough to overcome these fees [2].

What is the downside of swing trading? ›

The biggest con of this trading tool is the overnight risk. Swing traders hold positions for several days, which increases the risk of market gaps due to unexpected news or events. Another drawback is that many new traders may mistake false signals for trends.

Can I make a living as a day trader? ›

The same study found that the majority of trades, up to 80%, are unprofitable. While some day traders end up successful and make a lot of money, they are the exception rather than the norm. If you want to try day trading, start small and do not commit your entire investment account.

Who is the most successful swing trader? ›

Paul Tudor Jones - Another famous swing trader is Paul Tudor Jones. Jones is a billionaire hedge fund manager who is known for his aggressive trading style. He is one of the most successful traders of all time, and he has a net worth of over $5 billion.

Is day trading harder than swing trading? ›

Swing traders stay active for a few hours daily and don't stay glued to the computers the whole day. Day trading requires full dedication and time. It takes less expertise to swing trade than day trading.

Is swing trading riskier than day trading? ›

Is day trading safer than swing trading? If the risk is controlled on each trade, neither style is riskier than the other. Both trading styles could limit losses on each trade to 1% of the account, or 0.5%, or 2%, for example. That said, swing traders make fewer trades than day traders.

Can trading make you a millionaire? ›

In conclusion, while it is possible to become a millionaire through forex trading, it is not a guaranteed path to wealth. Achieving such financial success requires a combination of education, skills, strategies, dedication, and effective risk management.

Can I make $100 a day day trading? ›

You're really probably going to need closer to 4,000 or $5,000 in order to make that $100 a day consistently. And ultimately it's going to be a couple of trades a week where you total $500 a week, so it's going to take a little bit more work.

Can you make 200 a day with day trading? ›

A common approach for new day traders is to start with a goal of $200 per day and work up to $800-$1000 over time. Small winners are better than home runs because it forces you to stay on your plan and use discipline. Sure, you'll hit a big winner every now and then, but consistency is the real key to day trading.

Why $25 000 for day trading? ›

Why Do I Have to Maintain Minimum Equity of $25,000? Day trading can be extremely risky—both for the day trader and for the brokerage firm that clears the day trader's transactions. Even if you end the day with no open positions, the trades you made while day trading most likely have not yet settled.

Can you live off swing trading? ›

One of the main benefits of swing trading is that while it doesn't take much time, you can earn large profits for the time invested. This trading style can be anything you want it to be. If you are willing to dedicate yourself entirely to it, you can easily earn a living through swing trading alone.

Why is swing trading so hard? ›

Swing trading can be difficult for the average retail trader. Professional traders have more experience, leverage, information, and lower commissions; however, they are limited by the instruments they are allowed to trade, the risk they are capable of taking on, and their large amount of capital.

Why do most swing traders fail? ›

One of the most common mistakes that swing traders make is not having a well-defined trading plan. A good trading plan should include your entry, risk management and target booking. Without a clear plan, it can be easy to make impulsive decisions or to deviate from your strategy.

Do day traders or swing traders make more money? ›

Swing trading makes trades based on swings in stocks, commodities, and currencies that take place over days or weeks. As swing trade positions blossom over a longer period of time, there is greater potential for higher gains (or losses) compared to day trading.

Is swing trading as profitable as day trading? ›

Meanwhile, swing traders may not realize profits in their trades for weeks at a time. As such, it can be easier to make a living as a day trader. Keep in mind though – swing traders tend to earn more profit per trade as they ride the swing in an asset's price for longer periods of time.

How much does a swing trader make a day? ›

Some swing traders may make a few hundred dollars to a few thousand dollars per day or week during successful periods. However, losses are also a part of trading, and it's essential to manage risks and not trade with money you can't afford to lose.

Are swing traders more successful? ›

Bottom Line. The Swing Trading strategy can lead to profits in the short term, usually in the range of 10% to 30%. However, as most things investing usually are, it is a risky bet. About 90% of traders report losses during trading.


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