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Day Trading vs. Swing Trading (Video)

Day Trading vs. Swing Trading (Video)
March 10
20:27 2012

Day trading and swing trading have become increasingly popular among strategic traders, and they each make up a viable trading strategy for short term traders. However,  a number of important differences between the two strategies should be examined before deciding to implement either one.

Perhaps the most important difference between the two consists in the fact that day traders tend to close out all of their positions before the end of the trading day, while swing traders generally are not constrained by this rule.

What is The Strategy Behind Day Trading?

Day trading is generally defined as a trading strategy in which the trader implementing it opens and then liquidates all trading positions before the close of the trading day.

The general premise of day trading as a strategy consists of actively trading during a time frame when the trader feels most alert. This allows for the trader to watch their open positions when the market is most active and to take advantage of optimum trading opportunities and close unprofitable positions promptly.

Now, our video explains the difference.

Day traders generally use an easy to follow trading plan that can be implemented quickly and with maximum efficiency. In addition, limiting trading to a set time frame during the day effectively eliminates overnight risk that can result in sharp, sudden moves while the trader is not watching the market.

What is The Strategy Behind Swing Trading?

Swing trading differs from day trading primarily in the fact that positions can and are often carried for a longer time frame than a day. Overnight risk only becomes an issue when swing traders carry positions for more than one trading day.

The swing trading strategy can be described by the classic trading maxim of “Buy low and sell high” as the swing trader aims to profit from both trend following moves and subsequent corrections.

Swing traders often use technical analysis to identify key support and resistance levels on price charts to determine the best levels to initiate and liquidate trades. These levels can also serve to determine where to place stop loss orders to limit risk.

A strategy often employed by swing traders is to wait for a breakout of a trading range. The breakout can occur either on the upside or the downside. Once the price has broken out of a trading range, the swing trader will often take a position in the direction of the breakout.

Day Trading or Swing Trading — Which Works Best?

As with any trading strategy, the answer to this question lies completely with the trader. Each strategy works well for some traders and is generally only as good as the trader implementing it.

Both strategies will work consistently for some traders and not for others, and both have their advantages and disadvantages. The key to success over the long term usually lies in the quality of the trading plan that the trader formulates to implement the strategy.

Other videos you may enjoy:

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How to trade Gold?

What is a carry trade?


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Today’s Day Trader Strategy

One of the most common and destructive mistakes a day trader makes is to simply not follow their plans. Temptation, an “obvious signal”, and just simple greed can lead traders down the road of being undisciplined. This is without a doubt one of the most dangerous mistakes, as traders will often lose more than they originally planned as they raised their amount risked.