The Pros & Cons of Day Trading Vs Swing Trading


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Elvis Picardo

27 Jan, 2017

in Day Trading & Scalping and 1 more

Active traders often group themselves into two camps: the day traders and the swing traders. Both seek to profit from short-term stock movements (versus long-term investments), but which trading strategy is the better one? Below, we explore the pros and cons of day trading versus swing trading.

Day trading, as the name suggests, involves making dozens of trades in a single day, based on technical analysis and sophisticated charting systems. The day trader's objective is to make a living from trading stocks, commodities or currencies, by making small profits on numerous trades and capping losses on unprofitable trades. Day traders typically do not keep any positions or own any securities overnight.

Swing trading is based on identifying swings in stocks, commodities or currencies that take place over a period of days. A swing trade may take a few days to a few weeks to work out. Unlike a day trader, a swing trader is not likely to make such trading a full-time career.

Day Trading Pros and Cons


  • Potential to make substantial profits: The biggest lure of day trading is the potential for spectacular profits. But this is may only be a possibility for the rare individual who possesses all the traits - such as decisiveness, discipline and diligence - required to become a successful day trader.
  • Be your own boss: The day trader works alone, independent from the whims of corporate bigwigs. He can have a flexible working schedule, take time off whenever needed, and work at his own pace, unlike someone on the corporate treadmill.
  • Never a dull moment: Long-time day traders love the thrill of pitting their wits against the market and other professionals day in and day out. The adrenaline rush from rapid-fire trading is something that not many traders will admit to, but is a big factor in their decision to make a living from trading, compared with spending their days selling widgets or poring over numbers in an office cubicle.
  • Expensive education not required: For many jobs in finance, having the right degree from the right university is a prerequisite just for an interview. Day trading, in contrast, does not require an expensive education from an Ivy League school. While there are no formal educational requirements for becoming a day trader, courses in technical analysis and computerized trading may be very helpful.
  • Self-employment benefits: As a self-employed individual, a day trader can write off certain expenses for tax purposes, which cannot be claimed by an employed individual.


  • Risk of substantial losses: In an investor publication titled "Day Trading: Your Dollars at Risk," the U.S. Securities and Exchange Commission points out that "days traders typically suffer financial losses in their first months of trading, and many never graduate to profit-making status." While the SEC cautions that day traders should only risk money they can afford to lose, the reality is that many day traders incur huge losses on borrowed monies, either through margined trades or capital borrowed from family or other sources. These losses may not only curtail their day trading career, but also put them in substantial debt.
  • Significant start-up and ongoing costs: Day traders have to compete with high-frequency traders, hedge funds, and other market professionals who spend millions to gain trading advantages. In this environment, a day trader has little choice but to spend heavily on a trading platform, charting software, state-of-the-art computers, and the like. Ongoing expenses include costs for obtaining live price quotes and commission expenses that can add up because of the volume of trades.
  • Be your own boss: To really make a go at it, a trader must quit his day job and give up his steady monthly paycheck. From then on, the day trader must depend entirely on his own skill and efforts to generate enough profit to pay the bills and enjoy a decent lifestyle.
  • High stress and risk of burnout: Day trading is stressful because of the need to watch multiple screens to spot trading opportunities and then act quickly to exploit them. This has to be done day after day and the requirement for such a high degree of focus and concentration can often lead to burnout.

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