22 Dec

Day Trading vs. Swing Trading

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Let’s play a game…

Are you able to identify which type of trader you are?

Having trouble?

That’s ok!

Over 75% of traders fail to identify a trading style they associate themselves with.

There are many different ways of trading the stock markets… almost too many!

… And that’s also why so many fail to become successful traders.

This causes new traders to be all over the place with their trading.

As many experienced traders know, it’s best to be focused on a handful of strategies in order to be successful.

So let’s take a look at the pros and cons of day trading vs swing trading and see what group you fall into.


Day Trading vs Swing Trading

In trading, there is no ‘one size fits all’ strategy.

There are some traders who prefer trading quickly over shorter intraday only and others placing trades at a slower pace.

You know what?

The beautiful thing about the stock market and trading is that anyone can be profitable – regardless of the timeframe or even the strategy!

What does every trader have in common with one another?

They all have strict discipline to their trading and don’t let the news or the next fad distract them.

Beginning traders typically get caught up with some very common problems.

Thus this article will cover the pros and cons of intra-day and swing trading to determine the trading style that best fits you.

Note: In this comparison it is assumed that there are no pattern day trading restrictions on any account by having funds in excess of $25k.  

Day Trading

If someone says the phrase, “I’m a day trader”, they typically refer to buying and selling stock over a very short period of time, anywhere from minutes to hours.

Day traders aim to profit from short term price movements throughout the trading day and do not carry positions overnight.

Trading Frequency

Day traders tend to only hold trades for a short period and therefore tend to have a higher frequency of trades.

Depending on the aggressiveness of the trader and the markets they trade, it’s common to have anywhere from 1-20 different positions per day.

It’s important to remember that trading frequency tends to correlate to higher commission.  Therefore, the account has more expenses it needs to cover before it can be profitable.

This means it is very important to find a balance between trade frequency and profitability per trade.

Importance rating: 10

Trading Consistency

On average, a day trader is expected to generate a hundred (or more) trades each month depending on the markets they trade.

If a trader has an edge in the markets then it’s highly possible to be profitable most months.

It’s important to remember that day traders tend to allow the law of large numbers to work for them when creating trading systems.

Therefore, when talking about consistency for day traders it is standard practice to view the returns on a monthly or quarterly standpoint.

Importance rating:  10

Trading Returns

Traditional investors typically earn an average of 8-10% a year when they allocate assets to an index fund.

However, a day trader can return 100% or more per month depending on the style of trading.

It’s important to understand that this number may be misleading and should always be reviewed using a risk-to-reward methodology.

For example…

What is a better trading system?

Trader 1) 100% returns with 50% down draws


Trader 2) 10% with 1% down draws?

Answer: It depends.

Let’s break this down…

For trader 1:

100% return sounds nice…but having a 50% down draw can make many people run for the hills.

Essentially, risking 50% of your money day in and day out just to make 100% returns is only a 2:1 reward to risk ratio.

This means if a trader is trading a $50k account, he is risking $25k to make $50k.

That is not very great when most day traders push for a minimum of 3:1 return on their money per trade.

For trader 2:

10% returns sound boring…but having only a 1% down draw makes people feel very comfortable with this trader.

This means if a trader is trading the same $50k account, he is only risking $500 to make $5k.

This is a very nice strategy at a 10:1 risk to reward ratio on every trade.

To summarize, to the untrained eye, the 100% returns makes trader 1 out to be a superhero but in reality the 10% return is the true winner.

It is extremely important to understand the returns of your trading and make sure they fall in-line with your trading plans.

Note: This was a quick breakdown to returns, but analyzing a strategys profitability depends on a number of statistical information that is beyond the scope of this article.  (Stay tuned for a review of statistics in a later.)

Importance Rating: 10

Commission Costs

When trading at a retail level, the cost has always been insurmountable.

The costs were so high it made it nearly impossible to be a profitable trader.

This was until Robin Hood came to town.

Fast forward a few years and now all major brokerages have commission-free trading to all retail-trading accounts.

This is a huge advantage for retail trading and has put a lot of pressure on the retail brokerage industry.

Therefore, commission and trading costs are not irrelevant in retail accounts for both day and swing traders.

Note: This does not apply for proprietary trading firms or other professional trading platforms.

Please refer to your brokerage firm for their current pricing structure.

Importance Rating: 1

Screen Time and Stress Level

Day trading is an extremely intensive job that requires many hours in front of the computer screen.

Unlike other passive income streams, day trading requires 100% of a traders attention every day to be profitable.

You can kiss your vacation time goodbye if you are a day trader and require these returns to live on.

Importance Rating: 10

Scalability and Accuracy

Scalability is an extremely important aspect to selecting your trading style.

This means that your trading can be applied consistently as your account grows.

Day trading tends to have many limitations as accounts grow due to market liquidity, bid/ask spreads, slippage, and other microstructure dynamics.

It is extremely common for traders to find an edge in the marketplace where they can successfully trade for a living but once their accounts grow the same strategy becomes unsuccessful

Accuracy is similar to Scalability in that they both are more important as a trader experiences significant account growth.

As a trader evolves the accuracy of their execution becomes increasingly important to the scalability and success of their trading.

For example, if a trader is waiting for a breakout pattern at $330 on the SPYs, chances are they will be filled exactly at that price.

Why is this?

It happens because SPY has a very tight bid/ask spread and plenty of liquidity to absorb even the largest traders.

Unfortunately, this is not the same for many smaller cap names and highly volatile stocks.

Why is this?

It happens because these stocks have a very wide bid/ask spread and lack substantial liquidity.

This will result in the possibility of never receiving your trading price and “moving the markets” as you have shown your price to the HFT market makers.

Importance Rating: 1

Swing Trading

Swing trading is very similar to trend-following and methodologies from both can be shared amongst one another.

Swing trading (or trend-following) strategies are trading styles in which a trader is able to apply methods consistently throughout their account growth with minimal negative impact.

These trading styles are usually not impacted by many of the micro market structure nuances as day trading.

Many factors such as bid-ask spreads and tend to have a very minimal impact on this trading style.

Swing Trading is a self-explanatory trading style in which a trader aims to carry a position from swing to swing in the markets.

Swing traders profit from longer-term price movements and can even hold their position for months at a time.

Trading Frequency

Swing and trend-following traders seek to capture the longer term stock movement and therefore the trading frequency will be lower compared to day trading.

This is primarily due to the higher time frames a swing trader focuses on compared with day trading.

While trading frequency might be less important on a single market this can increase significantly if a trader focuses on a macro strategy.

With numerous markets being traded it is possible to have an active trading style like a day trader.

Importance Rating: 5

Trading Consistency

Most swing traders trade off daily charts and have a low frequency of trades.

Given the law of large numbers, it is not common to expect any consistency every month.  Instead, swing traders should look for consistency on a yearly basis.

Swing trading and trend following tend to lean towards wealth management rather than income generating.

This needs to be closely considered when it comes to selecting a trading style.

Importance Rating: 5

Trading Returns

Investors typically earn 8-10% a year when they allocate assets to an index fund.

However, a swing trader may expect anywhere from 15%-25% a year as they manage assets.

This is due to a combination of lower trade frequency and intermittent returns.

Since returns are not consistent on a month-by-month basis, it’s possible to see negative returns over any given trading period.

It is extremely important to understand the returns of your trading and make sure they fall in-line with your trading plans.

Importance Rating: 5

Commission Costs

Swing trading and trend following are negligible due to the low frequency of trading whether or not a retail trader or professional trader.

Importance Rating: 1

Screen Time and Stress Level 

Swing trading is a much less intensive job compared to day trading and does not require the constant screen time.

Therefore a trader does not need 100% of a traders attention to be profitable.

With this trading style there is much less maintenance required on a daily basis and allow for the trader to step away from the desk.

Importance Rating: 2

Scalability and Accuracy

Swing trading and trend following are extremely scalable strategies.

These strategies are not susceptible to the same limitations when it comes to liquidity, slippage, microstructure dynamics, and other factors associated with day trading.

Many of the largest investment firms, hedge funds, and asset managers all adopt a trend following or swing trading approach to their trading.

Importance Rating: 10


Trading is difficult and time consuming even for the professionals.

When aiming to find a trading style it’s common to get addicted to the high percentage payout, but like everything this comes with a tradeoff.

As the above table illustrates, a day trading strategy is almost 2x as more difficult to manage than a swing trading system.

This is due to a number of factors that impact the trading of each strategy.

If you have no financial liabilities and enjoy trading the markets actively then day trading is a more suitable trading style. It boils down to availability, lifestyle, and expectations.

As you can tell, there is no “one size fits all” in trading.

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