Swing Trading v/s Day Trading

Apurva Sheth
Do you relate to this conversation with your broker over the phone?

Broker: Good Morning Sir, we are recommending to buy ABC stock at CMP for an expected return of 50-60% over a year.

You: Why do you think so? What is the rationale for it to appreciate by 50-60% in a year?

Broker: Sir, the fundamentals of the company are very strong. It's a debt-free company. It is expanding its production capacity like anything. Next quarter onwards its sales and profits will increase multi-folds etc.

P.S. - This HNI investor and a group of investors also has a stake in it, and they are buying shares from market.

You: okay, seems interesting.

Broker: Should I buy some shares for you?

You: Yes, please buy XXX quantity of shares of ABC stock at current price.

Same day… after a few hours.

Broker: Congratulations Sir, the ABC stock that we had bought in the morning is up by 5%. Shall we sell it and book solid profits.

You: But, you had a 50-60% appreciation target in a year. What about that?

Broker: Our long term target remains intact. But why miss an opportunity to book such big intraday gains. The markets around the globe are so volatile you never what happens tomorrow. A bird in hand is better than two in bush…

You: Okay so what do you suggest finally?

Broker: Lets book profits.

You: Fine, go ahead and sell all of ABC stock.

And that's how most of you are introduced to the concept of day trading.

There isn't anything wrong in day trading at all. The problem is with not making a conscious decision to day trade and get swayed into it by emotions.

Most of the times people are lured into it by pep talk from brokers or by hearing someone make huge intraday gains. The media also plays a crucial role into luring people to day trade.

However, rather than blaming anyone else, it would be better if we look objectively at our own self and the decisions that we make. You will find that it is your own greed to make money quickly which draws you into day trading. All others merely act as facilitators while your greed is the real driver.

You can use others greed and fear to decide you want to be in which market, what stocks to be in and what time frame to trade. But your own greed and fear should be kept far away locked into a vault when you are making such decisions. I know it is difficult but that's what great traders/investors do.

By keeping the emotions at bay you can allow yourself to think rationally with an objective frame of mind. And that is what's required when you have to make a conscious choice between swing trading and day trading.

Now let me take you through both these styles of trading.

The first and foremost thing that comes to my mind while choosing between the two styles is the level of efforts required. Efforts not only in terms of knowledge and understanding the nuances of these styles of trading but also the time that you can dedicate during the day.

Day trading requires you to sit in front of screen and monitor your positions regularly. It takes a lot of time and effort to first build up positions, manage them and finally get out of those positions. It takes an altogether different level of dedication when you are day trading. And even after doing all this it isn't necessary that you will be profitable at it as it is merely a requirement for day trading.

Ask yourself this question whether you can devote so much time with your existing occupation. Will you be able to manage both the things at the same time? While you may make some money initially by working out some fast messaging to your broker or on the mobile portal that he has given. But eventually either of these, your work or your trading will suffer. And most often it is your day trading that will suffer because that's not what you rely upon for your daily bread and butter.

On the other hand a swing trader can devote a couple of hours after his office by end of the day when he is relaxing at home to study a group of stocks that he may be interested in. He can also study a bigger universe of stock over weekends.

The capital requirement for day trading will be higher if the trader is doing it for a living. Though he will be able to use leverage to take positions against his capital, but he will also have to keep a contingency fund to cover atleast 6 months of his household expenses.

The swing trader whose primary source of income isn't trading can start by allocating a small portion of his savings to trade in the markets. Once he gains confidence by trading in the markets he can increase the capital allocation and dedicate more time towards trading.

Day trading aims at capturing minor trends during the day so the profit expectation per trade can be anywhere in between 0.5% to 2%. Based on this a day trader has to take a certain number of trades which can be anywhere in from 1 to 'n' number of trades. A day trader will also have to consider the transaction costs that he has to incur on these trades.

A swing trader aims at capturing short and intermediate term trends that last from a couple of days to a few weeks. His profit expectation per trade can be anywhere in between 6% to 20%. The number of trades that he can take will be limited based on his capital allocated for trading.

Thus one should consider all of the above factors before venturing into day trading or swing trading. Most people will chose swing trading because it allows them to continue with their existing occupation and trade simultaneously. Someone else would chose swing trading simply because it fits their risk profile. However, one should not mistakenly assume that swing trading is easy, always profitable and doesn't require efforts.

And most important of all whether you choose to day trade, swing trade or not trade at all it should be 'your' conscious decision after considering all the factors involved.

Do you sell a stock intraday if it's in profits? Share your views in the Club or share your comments here.

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16 Responses to "Swing Trading v/s Day Trading"
03 Aug, 2016
Good article.make interesting reading Like 
arvind rane
28 Feb, 2015
Swing & day trading have their plus & minus points In day trade,. It is wise to book profits if the position has good profit, moreover the transaction costs are low for day trading. For swing trading, a fair degree of technical analysis knowledge is a must, besides the information on stock`s fundamentals.If the primary trend is up, swing trades provide good profit opportunities.Always depend with individual how much risk he can take during both trading. Like 
rajesh ajmera
22 Feb, 2015
sir as regards to day trading and swing trading both have their own uniqueness and distinctions in todays market scenario day trading is more safer than swing trading as the volatility in market isvery high and again it is more nowadays news based rather than fundamentals and technicals . Nowadays the market movement is so unpredictable that it tends to prove both fundamentals and technicals wrong .Hence in such cases its always better to get out with a small stipulated profit or loss as per ones luck or destiny whatever u say and sleep soundly rather than worry whats going to happen next day bcoz usually a trader becomes investor when things go wrong technically or fundamentally Like (2)
22 Feb, 2015
Any trading involves risk.Intraday though risky it is profitable when compared to swing because the loss will be more in swing trade if markets collapse without our knowledge. During intraday we may minimise the losses by putting stop loss.Like 
22 Feb, 2015
Swing trading makes more sense to meLike (1)
G K A S S Narayan
22 Feb, 2015
Day trade is for the retired people!?. Swing trade for the engaed otherwise people. There may be exceptions galore. Like 
s.n. varma
19 Feb, 2015
as there is no derth of good stocks i prefer day trading and enable myself to rotate my funds in stocks of my preference. ultimate result remains positive.Like 
19 Feb, 2015
Swing is best since our BP won't raise frequently. Let us have a constant profit rather than unpredictable oneLike (2)
yogendra pal singh
19 Feb, 2015
Informative &educating. ThanksLike 
Tilak Keshvani
18 Feb, 2015
Day Trades involve full attention , but end up with thin margins in general and also generate stress resulting from " Ifs" & "Buts" in regard to timings of entry, exit etc, .Whereas Swing Trades involve lower time consumption, lower stress, better profitability results ! I love swing indeed !!!Like (2)
Subramanian Ram
18 Feb, 2015
I have just one question to Apurva. Since markets are extremely unpredictable and volatile and swing trading necessarily involves carrying over the position overnight which is highly risky considering the impact of overnight developments on our makrkets, do you advocate stop loss limits. Asad does not advocate any stop loss limits, but due to constant pressure from the subscibers of AT has suggested certain limits which could be followed. The market always opens with a huge gap whenever there is some major news which has an impact in our markets. Shall be obliged if you could furnish a reply.Like 
18 Feb, 2015
You are correct in saying as Day Trading will require a different type of skillsets and can be done only by full time Traders. When it is done for a living they are put under pressure to earn a minimum of profit and things go wrong from there on. I've never sold any stock intraday though I'm in the market for 8+ years and the reason could be this is part time for me and I review the stocks after the market closes or during the weekend and never take any decision during market hours.Like (1)
Devshi Zaveri
18 Feb, 2015
Swing Trading Low Risk Less Gain v/s Day Trading High Risk More Loss or Gain.Swing Trader can devote more time with Social, Family or Own Business. Day Trader will B hurry hurry to site on the screen whether physically well or not. Some time U skip Lunch or evg. Tea. Mentally elevate or depress on mkt volatility. Day Trader will have speculative mind, sometime if he loose then break the TV Set or Gain then spend all his gain to enjoy. Roj Kamayo Roj Khao. No plan of Tomorrow. Overall Day Trading is worse, make man mad, crazy, suicidal Like (2)
18 Feb, 2015
As per my ideology preferred day trading with profit book with target.Like (1)
18 Feb, 2015
Swing & day trading have their plus & minus points In day trade,. It is wise to book profits if the position has good profit, moreover the transaction costs are low for day trading. For swing trading, a fair degree of technical analysis knowledge is a must, besides the information on stock`s fundamentals.If the primary trend is up, swing trades provide good profit opportunities. byk.Like 
18 Feb, 2015
Sir It's really a good article,worth understanding. No matter how tempting it is,intraday,I do prefer swing..Like (1)
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