- August 31, 2017
- Posted by: NetPicks
- Categories: Basic Trading Strategies, Day Trading, Swing Trading, Trading Article
As a company that develops trading systems for all types of traders, we often face the question of which style of trading is best. People are looking for which direction they should go – swing trading or day trading.
They also wonder if they need different trading strategies for both.
There are pros and cons of both styles but one thing they do have in common is that money management – how you manage your risk – will ultimately determine your success or lack of trading success.
You can use the same strategy for both styles of trading meaning how you determine your trading setup can be identical. The problem occurs when there is too much conflicting variables in regards to the trading setup. This is why discretionary trading can be difficult.
As you progress in trading, you start to learn many different things. You learn price action, structure, chart patterns, and how to use various trading indicators.
Information overload occurs and often times you will see something on the chart that is not part of your trading plan but you include it in your trading analysis.
This can start the ball rolling towards a host of trading issues:
- Over trading
- Lack of consistency
- Reactive trading
Imagine if you are day trading on the lower time frames. You are now making decisions multiple times during one trading session and if you are not disciplined to your trading plan, I think you can see where that will lead.
What about swing trading? Some traders forget that we are here to make money, not action. Traders that take a swing trading approach can also run into issues:
- Tend to micro-manage the trade
- Fear draw down leading to early trade exits
- Exit the trade because the trade is in profit and not for any objective reason
Both styles of trading have their own set of issues as well as common ones and all must be taken into account when choosing.
Day Trading Is A Job
If you are looking for trading to take over as your main source of income, you better understand that it is a job. While you don’t have a boss barking over your shoulder, you must:
- Be at your desk on time
- Be a risk manager
- Keep detailed records of all your trades
You will have multiple opportunities to make a trade during the session and also, as the name applies, exit before end of day. This will not have you suffering from anxiety while holding positions overnight – and if you are having anxiety about a position, you’ve done something wrong.
Keep an eye on your trading costs. Multiple trades per day also equals higher business costs and if you include slippage on your trades, you can see how day trading can be expensive. While commissions are considered the cost of doing business, there is an actual cost and if you take a loss, you lose on two fronts.
When some traders are asked why they want to trade, freedom is usually a motivating factor. What generally happens when they day trade is that they never end up with the freedom they seek. Trading becomes their new job and the entire day is spent plugging away in front of their computer screens.
That is one of the reasons all traders that are part of our Netpicks family are taught about the Power Of Quitting (POQ). This is designed to have traders involved during a trading session but will circuit breakers so they are not attempting to trade when the markets are not moving.
Home run trading?
When day trading, you are looking to hit singles instead of letting trades run for days. Using lower time frames for example, many day traders will look to take advantage of the impulse move and not stick through the corrective move. As a day trader, seeing a trade underwater expecting it to come back is account suicide.
Swing Trading Is More Relaxed
Not as glamours as its day trading cousin, swing trading is an very popular method of taking advantage of the trading opportunities the markets present.
Over trading is not as much of a concern as day trading because generally, higher time frames are used. On these higher time frames, trading setups take longer to mature so being seduced by the flashing lights on your screen is not something that usually happens.
You must be patient. Since trading setups take time to mature, it can be tempting to “see” a trade that isn’t truly there. Traders may run the risk of “tweaking” the trading plan to fit a forming price pattern into a trading setup. Like day trading, being consistent is vital and tweaking due to boredom is another route to failure.
Action junkies need not apply. You must understand and be clear on why you are trading. You must have the ability to sit through pullbacks against your profits without knee-jerking yourself out of the trade.
It’s have to see paper profits be erased but markets move in waves and you must accept the occasional pullbacks against your trades. We have seen it all an Netpicks and one thing that is certain, traders will constantly complain about seeing nice profits erased for scratch (that is a whole other issue).
- You do have the risk of overnight gaps that will challenge your trades.
- You do have the risk of evening events that shake the market overnight.
- You do have the risk of anxiety over holding trades without a watchful eye on the market
Humans are control freaks and leaving their trades running without someone “minding the store” can be a mental challenge. You have to understand the risks inherent with swing trading long before you place your first trade.
5 Questions To Help You Choose
Our hearts may opt for one or the other but just as you must never trade with your heart, you can’t decide this with it either.
It’s time for the honest assessment:
- Do you have the time to day trade? Is it realistic that you can be at your computer for the start of the session consistently?
- Do you have the ability to enter a swing trade, set your stops, and just let it play out? Can you sleep at night with an open position?
- Can you set your profit targets and barring any obvious price action against your position, let it play out?
- Do you have the funds to day trade? Are you looking for income producing trading or a way to simply grow your nest egg?
- Are you comfortable with risk?
Now that you have your answers in hand, what is your next step?
Netpicks Inner Circle Is Open
Over the years we have seen traders change their direction in this business.
Perhaps they’ve started with a swing trading strategy and have done well enough that their day job is no longer a necessity. These same people would then head off and look at a day trading strategy that we offer and set off on another journey.
Traders have started day trading Futures, added swing trading Forex (or currency Futures), and have now been educated on the power of Options trading. Our in-house Options trading specialist helps them to get on the right track to their new trading goals.
Regardless of where a trader begins, Netpicks is alongside them as they mature and develop into a well rounded trader.
Change is inevitable both in the markets and in a trader. Netpicks has always made its mission to help guide the serious onto a track where their trading goals can be met.
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More Than Just Systems
We attack the Achilles heal of most traders, the psychological, money management aspects of trading that are crucial to any traders success. Risk management is key in both swing and day trading and we focus on that so that you learn from past mistakes and don’t wipe out another account.
The road to growing your account is never a straight line, but with our plans, strategy and training, you will succeed as long as you are able to take the next trade.
So swing or day trading, we are there with you every step of the way. You don’t have to ever choose.