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Day Trading vs Swing Trading

trading memeChoosing which strategy to trade Forex is usually a big hurdle for many people. Some even keep trying one after the other in pursuit of finding the “holy grail” While it is good to try  out strategies you need to find one that suits your personality and stick to it. One of the first steps in coming up with a trading strategy is determining your preferred trading style. There is no perfect strategy in Forex. You have to come up with your own method. You can use other peoples strategy as a guideline but if you have traded for long enough you will know that in the end you have to make adjustments to suit your needs.

In this article we look at 3 methods of trading. Swing trading, Day trading and scalping.

SWING TRADING

The First and one of the most famous trading strategies is swing trading. Swing traders use technical analysis to look for currency pairs with short-term price movements. Swing traders are interested in price patterns and trends. They usually hold a position for several days. Its held longer than a day trading position but shorter than a buy and hold position. So its a medium term strategy. A typical swing trade lasts between a few hours to a few days. Swing trading is also our personal favorite at SZ ventures.

To start with you look for the trend, wait for a small counter trend movement (pullback) and enter at an appropriate level possibly a previous support or resistance level.

Here is an example of a long position:

 

For swing trading you don’t require too much time analyzing the market. Most swing traders look at the market for only 2-3 hours a day.Its suitable for patient people, you have to wait for setups to form and then the position could be held for days. The trade usually have a good Risk to Reward ratios hence easier to maximise profits. On the Flip side it needs a lot of patience and you will have fewer trading opportunities than day traders and scalpers

DAY TRADING

The name says it all. In this strategy there is one very strict rule : “No overnight Positions” You simply open a position and make sure you close it before the end of the day. A typical day trader looks for two things in a trade: liquidity and volatility. Liquidity allows you to enter and exit at a good price. Volatility is simply a measure of the expected daily price range – the range in which a day trader operates. More volatility means greater profit or loss.

Traders who have low risk tolerance might prefer a day trading strategy to avoid overnight risk.Being a day trader you will be sleeping better at night especially if you have ended the day in profit. Its suitable for traders who have low risk tolerance. Day traders usually trade lower time frames. In day trading a trader needs a much higher degree of focus and concentration when placing trades. This can be challenging. Day traders must also stick to the discipline of closing out trades before the close of the market, whether the trade is profitable or not.

SCALPING

This is the most short term trading style. In scalping you attempt to make small profits throughout the day. Most scalpers use technical analysis. Scalpers use very short time frames mostly 1min, 5min and 15min charts. They open hundreds of positions a day with very small stop losses. They profit from the few trades that go in their direction. Mastering scalping can be more difficult than both swing and day trading. Scalping can appear easy because a scalper might make an entire day’s profit within a few minutes. However, this is an illusion, and in reality scalping can be very difficult because there is very little room (read as no room) for error.

Day trading, Swing trading and Scalping are not trading strategies in themselves and are trading styles. They can be used with price action trading strategies or indicators, for example moving average crossovers. If you want to learn forex trading visit our education section. We have lots of material there to help you get started all for free.

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2 thoughts on “Day Trading vs Swing Trading

  1. […] report in pips and for exotic currencies we restate the number of pips to match the majors. We use price action swing trading no automation in that. We use positive Risk to Reward Ratios, at least 1:3 or higher. Trial periods […]

  2. […] we have both good and bad months, however we trade consistently stick to our strategy which is Price Action Swing trading and look to teach our members how to navigate the FX […]

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