Day/Swing Trading?

This is a discussion on Day/Swing Trading? within the First Steps forums, part of the Reception category; a few questions really just to help me on my way... what is the difference in risk between the two? ...

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Old Feb 17, 2004, 2:29pm   #1
 
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Day/Swing Trading?

a few questions really just to help me on my way...

what is the difference in risk between the two?
what sort of time scale is swing trading usually over?
whihc would you recommend a beginner to start with? (im not too bothered about winning or losing lots of points as im only going 1p a point, i just want to build up experience and knowledge)

thanks in advance
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Old Feb 17, 2004, 3:03pm   #2
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Re: Day/Swing Trading?

Quote:
Originally posted by matt85
a few questions really just to help me on my way...

what is the difference in risk between the two?
what sort of time scale is swing trading usually over?
whihc would you recommend a beginner to start with? (im not too bothered about winning or losing lots of points as im only going 1p a point, i just want to build up experience and knowledge)

thanks in advance
The main difference in risk is the timeframe - how you define that risk within that timeframe depends on your own risk/reward/time ratio and how you trade.

eg. some may regard day trading as more risky than holding overnight, others may regard holding a position over night (when anything may happen) as more risky than day trading.

Swing trading tends to be 1-3 days, day trading open and close in the same day.

Unfortunately without knowing what time you have available, what products you want to trade etc.. nobody could - or should - advise you on what time frames to trade, this is something you need to sort out for yourself - there are equally successful day traders and swing traders - personal choice (usually governed by outside influences)
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Old Feb 17, 2004, 3:21pm   #3
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Just to add to this a little (I agree with everything tbs has said), I would also recommend you look at the spread v timeframe you are considering dealing in. The larger the spread as a % of the risk you are prepared to take, the greater the risk in trading that instrument in that timescale.

I personally do not like to trade if the spread is more than 10 to 15% of my prospective stop loss level.

ie a) if spread is 3 and prospective stop level is 30, this is fine as spread is only 10% of stop.

b) however, spread of 5, and stop of 10 (50%) I would consider too risky.

Reasons? makes it much harder to acheive worthwile reward: risk ratio.

In example b above, without taking spread into account, if I wish to acheive r:r of 2:1, my stop is 10 and target is 20.

Taking stop into account, my risk is 15 (10+5) and my target is 15 (20-5) which gives r:r of 1:1 in reality.

Obviously, the lower the % of spread/ stop, the less effect on r:r this has.

If faced with the issue in example b above, either look at another instrument or look at the same instrument, but on a longer timescale.

As an example. SB'ing FTSE with a spread of 4 or 5 on 1 or 5 min charts is probably going to have a large % spread v stop.

However, on a 1 hr or more timescale it may be ok.

For shorter timeframes, have a look at currencies. ie eur/usd and gbp/usd will have acceptable % spread v stop on 10/ 15 min timescales
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Old Feb 17, 2004, 3:28pm   #4
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Re: Day/Swing Trading?

Quote:
Originally posted by matt85
(im not too bothered about winning or losing lots of points as im only going 1p a point, i just want to build up experience and knowledge)
Matt, trading with money you're not 'bothered' about is a good thing. Emotional detachment from losses (and gains for that matter) is important.

However, it wouldn't hurt to have a bit more of a bias toward expecting more winning points than losing points.

Expectation (i.e. reward) has a lot to do with the outcome in this game.
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Old Feb 17, 2004, 3:44pm   #5
 
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matt85 started this thread thanks for all of the above.

some very good points made there, especially in relation the size of the spread in relation to the time frame. i hadnt really thought about that yet to be honest.


rest assured the learning curve continues to be almost vertical!
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