Swing Trading and day trading : two strategies with different time horizons

Swing Trading and day trading are trading strategies that allow you to profit from price fluctuations over different time horizons. However, they’re not suitable for the same types of investors.

"In this world there's two kinds of people, my friend : those who do swing trading, and those who do day trading." This would be what Clint Eastwood's most famous quote would have looked like if The Good, the Bad and the Ugly had taken place in the finance world! These two strategies have polarized investors for many years, and reflect two different visions of trading and its practice.  

Here is a comprehensive summary of the information you need to determine which investment strategy to adopt, between swing trading and day trading, according to your specific profile.  

Swing trading

Swing trading (the term "swing" refers to the ups and downs of financial charts) is a medium-term investment method that consists of taking advantage of price trends of assets on the financial markets. The objective of swing trading is to trade "with the flow", i.e. following the upward, downward, or stagnant price trends of traded instruments. In this strategy, traders hold their positions for a few days or even weeks.

Through thorough analysis of the markets in which they intervene - an analysis that eliminates as much as possible the subjective and emotional aspects that hinder the correct interpretation of trends - swing traders try to anticipate price movements in order to position themselves in the best possible way to generate capital gains.

Swing trading is therefore based on small, but very regular gains, which allow the trader to increase their capital over the days and weeks of investment. This trading strategy can be implemented on all types of financial assets: stocks, currencies, commodities, and stock indexes among others.

Day trading

Day trading is an investment strategy that uses new technology to enable traders to trade a large number of positions in the financial markets in a short period of time. Day trading consists of opening and closing a large number of positions during the same investment session. Very similar to scalping, day trading exploits high volatility markets in order to take advantage of the sudden and wide price fluctuations that characterize them. Trades are made for no more than a few hours, minutes, or even seconds, and the gains are minimal - usually between 0.5% and a few percent of the capital invested on each trade.

The main objective of day traders is to obtain an overall positive balance on all operations at the end of the investment day.They then increase their return by multiplying small transactions with a high leverage effect, increasing tenfold the potential gains (but also the losses).

In day trading, the most traded financial assets are :

  • stocks
  • options 
  • futures contracts 
  • currencies

Swing trading VS day trading

Both swing trading and day trading have their pros and cons. There is no one strategy that is inherently superior to the other: traders are best served by choosing the investment method that best suits their lifestyle, skills and goals.  

Day trading

This strategy is primarily aimed at enthusiasts who want to trade full-time. In addition to a solid ability to make quick decisions and self-discipline, day traders must be able to devote several hours per day to trading. They must also have a good command of technical analysis and be familiar with several chartist patterns. Finally, day trading requires you to be able to stand up to stress, as losing trades are a regular occurrence.  

Swing trading

The swing trading strategy is less demanding than day trading, both in terms of the skills required and the lifestyle it involves. Thus, any trader with sufficient capital is likely to implement a swing trading investment strategy, without making it their primary activity. Swing traders usually have a full-time job and invest in the financial markets in their spare time. Swing trading also requires a good knowledge of technical analysis, but also of fundamental analysis, in order to best interpret long term trends in the markets through macroeconomic data.