Most traders entering the market have to pick a style…
Either to swing trade or day trade.
Like anything else, they both have their pros and cons.
While this might piss off some die-hard day traders (and some might roll their eyes)…
From my experience, I can tell you swing trading is way better than day trading.
I’ve tried both, and that’s just my opinion.
What is Swing Trading?
Swing trading is a trading technique that’s based on identifying swings in stocks — in this case, penny stocks — that occur over a period of time (usually a few days to a few weeks).
Unlike with other techniques (like day trading) that moves happen within a short period of time, say, minutes, swing traders do not need to be glued to their computer all day. This gives you the flexibility to trade while keeping your full-time job.
Swing traders usually study technical and fundamental indicators and enter positions on stocks that have the potential to gap up over a short period of time. This can open you up to the possibility of larger profits that can be acquired from holding on to the trade for a little longer.
What is Day Trading?
Day trading is the activity of buying and selling penny stocks based on the price movement within a single trading day.
Penny stocks are volatile which usually leads to quick changes in price action. And day traders often look to take advantage of these moves by making dozens of trades in a single day, based on technical analysis.
These positions are held for a very short period usually seconds to a few hours during the trading window.
Unless the trader has all the necessary traits required to become a successful day trader — like experience, discipline, and decision-making — the profit margin is usually very small.
One thing that holds true for day trading is that it requires serious attention to monitor positions and decide when to exit.
Why is swing trading so much better?
Swing trading and day trading might sound similar, but there are clear differences. One being the number of times trades are being made.
Now I’m not discrediting day trading. In fact, both trading styles offer gains, but success depends on factors like capital, time, trading psychology, and lots more.
Personally, I tilt towards the swing trading side of things for several reasons…
1. Higher Profit Margins
It’s normal and expected for traders to analyze the stocks they stake their money on. But in the case of day trading, traders are more concerned with the public opinion of a stock, rather than its underlying value.
On the flip side, swing trading opens up the opportunity for seasoned traders to take advantage of an underpriced stock to cash in on a frothy market.
Unlike day trading where folks are looking to make a small amount of gains, swing trading offers anyone that plays their cards right to high-profit margins with one good trade.
Please Note: being profitable depends on different important factors like your skill level, experience, dedication, the volatility of the market at any particular movement, and major events that will keep the market down.
2. Lower Risk & The Opportunity To Learn The Markets
From my experience, the risk levels associated with day trading are high due to the fast-paced nature of trades. And is just not something beginners that do not have a solid grasp of the market should deal with.
With limited time to make decisions, it’s easy to let emotions get in the way and make mistakes.
Swing trading allows new traders to take advantage of the longer trends, properly analyze available data, understand the market…and eventually make calm decisions.
In short, swing traders have the opportunity to learn through trial and error without risking a huge chunk of their account in hours.
3. Less Stressful
Ask any seasoned day trader, they’ll tell you they’re always on their toes!
While there’s the opportunity for profit, day trading requires fast thinking and constant eyes on the market. There’s the constant pressure to win trades, which in turn can affect decision-making.
Day traders have to analyze news regarding a stock, decide the right moment to buy, and then keep their eyes peeled for the right moment to sell. I think we both agree it’s a nerve-wracking experience.
But swing trading on the other hand gives traders days or weeks to adjust to the changing market. The time frame involved allows traders to properly focus on the entry and exit, and adapt to the market accordingly. It’s just less stressful and less-risky too.
4. Lower chances of wrecking your health
When our eyes spend more time focusing on near objects, like phones, screens or even paperbacks, it makes our eyeballs elongate, which prevents the eye from bending light the way it should. This elongation increases nearsightedness, called myopia, which causes distant objects to appear blurred.
Yes, bad eyesight is one of the risks of being a day trader.
You constantly have to stare at your screen (or two) blinking red and green and monitoring numbers for several hours…every trading day…all of this over the several months or years.
But that’s not all.
Ask an experienced day trader and they’ll tell you the extreme anxiety they deal with, coupled with the heart-pounding rage that comes with losing.
One thing’s for sure…feeling blood pumping through your entire body and literally feeling your heartbeat is definitely not a good sign. There’s something wrong with your blood pressure.
On the flip side, swing trading doesn’t expose you to such extreme pressure.
You have the time to think through your decisions, place your trade, then log off and go live your life!
5. You get to have a real life!
This is somewhat related to the previous point.
Honestly, day trading takes away your productivity and connections with the outside world.
Day traders have to spend hours closely monitoring trades with the sole aim of profiting off the market — or more realistically, the unfortunate guy on the other side of my trade.
Over time, most day traders come to realize they’ve lost touch and connection with friends, family, and the entire society. And as more time passes, it gets harder and harder to get an actual career (other than trading).
The harsh reality is that these emotional strains can push people to the extremes. A few years ago, this teenager committed suicide!
6. No minimum capital requirements
You’ve most likely heard of it already, but anyone that wants to be a day trader in the US needs a minimum account size of $25,000 due to the pattern day trading rule. And the truth is most people starting out, just do not have that much to risk.
On the flip side, swing trading doesn’t have any capital requirements. You can open multiple positions at any given time as long as you hold them for more than a day.
Day trading is an intense and stressful trading method that relies on an advanced understanding of technical analysis. Day trading penny stocks requires a high risk-tolerance level and decision-making under pressure — which is something beginners struggle with.
On the flip side, swing traders apply a combination of fundamental and technical analysis, rather than technical analysis alone. Because it does not require full-time attention, it’s the better option for traders who want to keep their full-time jobs but also profit from the markets.