People ask me all the time,
"Should I day trade or
should I swing trade?
Which is more profitable?"
And that's what we're going to
talk about right now.
You see, swing trading versus
day trading, which one is better?
Well, let's define it first.
When you are swing trading, and
it doesn't matter what instrument
whether you're swing trading stocks,
or options, or Forex.
When you are swing trading you're
holding your position for a
few days.
For me personally, I like to
hold a position between 5
to 20 days.
When you're day trading you're
opening and closing a trade
within 1 day.
For me personally, when I'm day
trading I'm usually in a position
between 5 and 20
minutes. So again, swing
trading 5 to 20 days,
day trading 5
to 20 minutes.
So what are the main differences
and what are the pros and cons?
Let's talk about the first factor,
time.
When day trading you need to
sit in front of the computer.
I personally, when I day trade,
I sit in front of the computer for
1 hour.
And here's one important thing if
you want to succeed with day
trading, two conditions
have to be met.
You need to be ready and
the markets need to be ready.
What do I mean by this?
Well some people say, "You know
what? I am working throughout
the day so I'm busy, but
I can day trade
at night," and so they say, "All
right, so what is the best market to
day trade from 8 to 9 pm?"
Probably no market because the
markets are not moving during
the time.
So, based on my experience,
markets move in the open
and in the close.
So this means between 9
and 10 Eastern Time, which is
shortly before the open and
shortly after the open, or
then from 3 to 4
o'clock which would be right into
the close.
So, this is where
for some people it might not be
possible to do day trading.
On the other hand when swing trading
you can do it any time,
especially when the markets
are closed.
All you need is 15 minutes per day.
The way how I like to trade is I
like to look at charts
at night when the markets are closed
to make my swing trading
decisions for the next day.
By the way, if you're interested in
how exactly I'm doing
it I've set up a website for you
it's called mytradingroutine.com.
And if you go there you'll see
exactly how I find
the best stocks, when I enter
these stocks, where do I place
my stop loss and when
do I take profits and this is for
stocks and options.
So, the first criteria,
time. If you do have time
throughout the day, day trading
might be for you.
If you do not have time throughout
the day swing trading
might be better for you.
Now let's talk about profit because
after all I said we want to talk
about what is more profitable,
swing trading or day trading?
Here's a rule of thumb.
The smaller the timeframe,
the smaller your stop loss.
Let me give you an example so that
you know exactly what I'm talking
about.
Let's say you're trading a stock
and the stock moves $2
per day.
When you are swing trading you
need to place a stop loss of
at least $2,
otherwise you might get stopped
out throughout the day while
the stock is moving.
And when swing trading you want to
be in a position between 5
and 20 days so you need
to give the trade a little bit more
room. So therefore, you need
a stop loss of at least
$2.
When day trading you can
use a much smaller stop loss.
I personally like to use a stop
loss that's 10%
of the average daily range,
the ADR.
So in this example, if a stock
moves $2 per day
you can choose a stop loss
of only 20 cents.
So the stop loss is much, much
smaller. Therefore,
even though most people thing that
day trading is riskier it
is actually less
riskier because you risk less.
The disadvantage is
a smaller stop loss means
that you have a smaller profit
target.
The golden rule for me is that for
every dollar that you raise you
try to make $2.
So in our example when swing
trading, and you're risking $2,
you're trying to make $4.
On the other hand, when day trading
and you only risk 20 cents
you're trying to make 40 cents.
So, what would you rather make
$4 or 40 cents?
Now here's the important thing,
when day trading of course
you have more trading opportunities.
So when you're swing trading you
might have one opportunity per
day. When day trading you
might have 4, 5, maybe
10 opportunities per
day. So even though you make smaller
profits, you make more
of these smaller profits.
Here's what I personally do.
I personally swing trade
stocks and options, and
I day trade futures
for leverage.
Especially with futures you have
enormous leverage.
For example, in crude oil you
have the leverage of one to
one thousand.
What does this mean?
It means that if crude oil moves
$1 and you're trading one
contract of crude oil futures,
you're making or losing
$1,000.
So, think about it this way,
swing trading is like driving
a car at regular speed.
Day trading is driving
a car on the german autobahn
with 160 miles an hour.
So when swing trading you
can take your time to analyze
the market.
When day trading you have to be
absolutely focused and this is
why I only trade for one hour
a day, because after one
hour I lose focus and
when it comes to day trading
this can be dangerous.
Which one is better?
Day trading or swing trading?
Well it depends on your situation.
If you do have time throughout
the day to watch the markets and
you know what you are doing day
trading can be very profitable.
If you are new to trading I
recommend that you start with swing
trading and then after
a while at day trading
to the makes.
So now you know the difference
between day trading and swing
trading and what's best for you and
I hope that you found this helpful.
And if you did please, leave a
comment or let me know what do
you prefer?
Day trading or swing trading?
Or if you're currently trading, what
do you do and why?
Why do you swing trade or why do
your day trade?
Or why you trade with one
or with the other? Please make sure
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YouTube. If you know anybody
who might find this video helpful
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