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Swing Trading VS Day Trading VS Investing: Understanding the Difference

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Today, I’m going to be covering the difference between a day trader, swing trader and an investor because they are completely three different animals. Just because you have a zoo doesn’t mean that every animal is the same. And it’s the exact same thing when it comes to swing trading vs day trading and investing.

Swing trading, day trading, and investing are all different approaches to participating in financial markets and in this post we look at their similarities and their differences.

But the great thing is having knowledge in fundamental trading principles and financial markets will help become profitable whether you swing trade, day trade or choose long term investing. Day trading knowledge in technical analysis and indicators will help you choose good entry and exit points no matter which of three models you choose. 

But back to the focus of this post and looking at the main differences between swing trading vs day trading and investing.

So let me make it a metaphorical way for you to understand better. If you are investing (we’re going to do it as a geography metaphor) for instance, if I am an investor, that means I am looking at the entire United States as a country.

If I swing trade, I only focus on New York (one city in the United States).

And if I day trade I focus only a specific street in New York City to get even further down in terms of scope. 

So how does this relate to day trading, swing trading and investing? We get into that more in this post so keep reading on to learn more.

So scope and focus is another way I like to differentiate between trading and investing. With investing having a wider scope and trading a narrower one if we use the analogy of the US and New York as I just described.

Trading vs Investing

Before we get into the differences between swing trading vs day trading and also how they differ from investing, we first need to establish what the difference is between trading and investing.

Because really when we break it down both swing trading and day trading are both forms of trading which itself is quite a different ‘beast’ when compared to investing.

Trading (whether we are talking about swing trading vs day trading) involves buying and selling financial instruments such as stocks, currencies, commodities, or derivatives with the aim of profiting from short-term price movements. 

Traders often employ technical analysis, chart patterns, and trading signals to make decisions. And when we get further down into it, trading can be further categorized into swing trading and day trading, which differ primarily in their time horizons and trading frequency.

swing trading vs day trading vs investing, similarities and differences
Swing trading, day trading, and investing are all different approaches to participating in financial markets and in this post we look at their similarities and their differences.

Investing, on the other hand, is a long-term strategy focused on building wealth over time through the appreciation of assets. Investors typically buy and hold assets such as stocks, bonds, real estate, or mutual funds with the expectation of long-term growth and income generation through dividends or interest payments.

Fundamental analysis, which involves evaluating a company’s financial health, industry trends, and economic factors, is often used in investment decision-making.

Swing Trading vs Day Trading

So we understand that swing trading and day trading are both forms of trading which differs from investing. 

But just how do swing trading and day trading differ?

The main differences between swing trading and day trading primarily revolve around their time horizons, trading frequency, risk levels, and strategies.

So let’s look at their differences considering these factors.

The main difference between swing trading vs day trading lies in the time frame that traders execute their trades and focus on.

Swing trading involves holding positions for several days to a few weeks, aiming to capture medium-term price movements. Day trading is about opening and closing positions within the same trading day, with no positions held overnight. It is also known as intraday trading.

Another important distinction between the two is in the frequency of trading. 

Swing trading typically involves fewer trades compared to day trading since positions are held for longer periods. And since day trading involves frequent trading throughout the day, this means that day traders do multiple trades within a shorter time in order to capitalize on intraday price movements.

So in short when it comes to swing trading vs day trading, one important difference is that day traders execute a lot more trades than swing traders and quite a lot more to be frank.

The third difference we will highlight are the profit targets.

Swing trading aims to profit from short- to medium-term price movements, often seeking to capture a portion of a larger trend. While day trading focuses on profiting from short-term price fluctuations within a single trading day, with trades typically closed before the market closes.

Screen time and overall time commitment is another key difference between these two models of trading.

time in front of the screen is a big difference when it comes to swing trading vs day trading
Day trading demands significant time and attention throughout the trading day (and a lot of time in front of the screen) compared to swing trading.

Overall swing trading requires less time commitment compared to day trading since positions are held for multiple days to weeks, allowing traders to analyze markets and make trading decisions with a longer-term perspective.

Day trading demands significant time and attention throughout the trading day (and a lot of time in front of the screen), as traders need to monitor market movements, execute trades swiftly, and manage positions within a short timeframe.

Swing Trading vs Day Trading vs Investing

Day Trading

So let’s look again at these three models side by side by side. And think back to the geographical example I used at the beginning of this so you can picture the difference in scope and focus i.e United States as a country (Investing) – down to New York City (Swing Trading) – and further down to a specific street in New York (Day Trading).

So, with day trading you have a very specific focus. You have one instrument or maybe you have several stocks. First of all, you know exactly which market you are trading. It could be either; the forex, futures, options or stock market.

You cannot have all four. You will lose instantly. And even within all within each of those, you should have one or two or maybe at most a few instruments that you’re focusing on. Personally, I only focus on one.

You are also in and out of trades in that exact same day. You never go longer. Usually my trades don’t last longer than 30 minutes, and that to me is a stressful time.

Usually I like between 5 to 15 minutes. So this is for day trading. And I like to focus on trading futures. For example the ES Mini I am in and out of trades between 5 to 15 minutes.

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Swing Trading

With swing trading you could have several instruments. But it’s still very, very highly recommended that you focus on one specific market.

If you’re doing commodities, maybe at this point you have several instruments, it could be crude oil, it could be sugar, it could be ES Mini and maybe a few others.

Because now you’re not focusing completely only on that one in that one day. You’re giving yourself two weeks to a month with swing trading.

Actually I should say, anywhere over a day to about 3 weeks, more or less – this is swing trading. It’s faster, but you could do it with less worry and you’re looking at longer a much longer time frames.

Investing

Now investing they say diversity is key when it comes to investing. It really is. Do not put your eggs all in one basket. But diversifying is only for investing.

When it comes to day trading – do not diversify. Because you need to be ultra laser focussed on your one particular market.

But diversifying is great for investing. For example it’s great if you have some stocks, if you have something in commodities, if you have some bonds, If you have treasury bills, it’s a different dynamic (compared to trading).

Because for investing, I personally have been in some of my investing portfolio stocks now at least for like four or five years and I have no plans of taking them out. They are in my Roth IRA. That’s investing. So I have several different eggs in different baskets when it comes to my investing portfolio.

Swing Trading vs Day Trading & Investing: Wrap Up

So day trading you’re in and out during the day. Swing trading usually up to three weeks, more or less, maybe a month.

And investing is anything much longer than that.

So hopefully this gives you more of an idea why investing is nothing to do with day trading.

If you want to learn more futures trading strategies and start day trading on your own with ease and confidence – Sign up for the FREE How to Day Trade Mini Course.

After that, if you have any questions you can always ask me at thetraderchick.com. Come to my Facebook group and introduce yourself, let me know your experience with trading.

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Understanding the Different Between Swing Trading and Day Trading
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