In this article, we will talk about day trading vs swing trading vs position trading. Day trading is great for people who can trade full-time, Swing trading is better for beginners and people with full-time jobs and position trading is great for someone who doesn’t have time to trade that often.
Position trading
If you’re looking to avoid the noise of the daily markets and don’t have much time to analyze the markets, position trading might be for you. This trading strategy is less time-consuming than swing trading. It involves taking large positions, which can be very risky as well. Position trading is also suitable for people with full-time jobs. In fact, position trading is heavily utilized by institutional investors.
With position trading, you’ll be allowing your positions to consolidate and go through retracement periods. As a result, you’ll likely experience a 1-step up or down phenomenon. As you wait for the market to move in the direction of your positions, you’ll keep your trailing stop wide. This allows your security to breathe. Position trading doesn’t require you to monitor your trades as much as swing trading does, which is perfect for busy traders. However, position trading produces fewer opportunities than swing trading, so you may not be able to earn as high a profit.
The primary difference between position trading and swing trading is the length of time you hold an asset. With position trading, you hold your positions for days or weeks while swing traders hold their positions for hours or even days. The latter strategy is slower than swing trading and depends heavily on fundamental reports and charts. It is, therefore, more suited for those who wish to invest for the long term.
Swing trading vs Day Trading
There are some major differences between day trading and swing trading, and the key is to understand the key difference between these two types of investment. In general, day traders focus on short-term trends. Swing traders, on the other hand, seek to capture a portion of the price movement.
This type of trading requires a higher level of risk because you aim to reduce your losses quickly. While day traders aim to maximize their profits, swing traders are less likely to have the “need to make money syndrome,” the urge to squeeze profit from every single trade. In fact, this syndrome can lead to blowing your account more often than not.
A day trader can benefit from enhanced leverage, which allows them to buy and sell a position with 4 times the amount of money they would with a non-leveraged position. The downside of day trading is that the market can work against you, particularly if you don’t have a huge corpus of money to invest in a large number of different securities.
Compared to day trading, swing trading is more time-consuming and requires a great deal of research and analysis before you can begin profiting.
While swing traders primarily rely on technical analysis and short-term trades, they can also use fundamental analysis. For example, a swing trader might see a bullish setup and want to verify the fundamentals of the asset.
The ZigZag feature can help traders evaluate the risk and rewards of swing trading. The key difference between day trading and swing trading is the amount of time they hold the position.
Position trading requires you to trade overnight
One of the risks of position trading is the risk of losing money a lot of money. Overnight positions seldom convert losses into profits. Moreover, overnight positions may be affected by catastrophic news and events. Hence, some investors maintain a daytime trading policy.
Moreover, you may be required to use broker leverage to trade overnight. If you want to make money with position trading, you need to understand the risks involved in overnight trading. After all, the main purpose of position trading is to increase profits per trade.
Another risk is that you may end up losing money if you leave profitable trades open overnight. Some traders may leave their trades overnight in hopes of getting back their losses as soon as the market opens. However, many investors are not bothered by short-term swings.
As a result, they choose to hold their positions overnight to make more money. However, it is important to know that overnight positions may also incur significant losses.
If you leave your position open overnight, it is imperative to reduce your size. This way, you can avoid the possibility of being affected by random fluctuations. Position trading is a good way to participate in significant trends and increase profits exponentially.
But be aware that position trading involves higher risks and requires more working capital. Moreover, some brokers may require you to put up to 50% of your capital as a margin. Furthermore, because of the higher ranges involved, position trading has a larger stop-loss risk.
A stop-loss of 15-20 points may be sufficient for an intraday trade in the Nifty Futures Contract. But for long-term positional trades, you will need to place a stop-loss between 40-150 points.
Is swing trading safer than day trading?
Although swing trading relies on less margin, it is not completely risk-free. As with any other form of trading, it is possible to lose money and wind up in debt. However, proper risk management is the key to successful swing trading. Here are some ways to minimize risk.
You can use swing trading to your advantage and avoid falling into the debt trap. Here are some tips to help you make more money from your swing trades.
Swing trading involves a longer time frame and greater potential profits. It also involves more trading decisions, often resulting in mistakes. Swing traders hold their positions for a longer period of time, and they don’t need to spend all day staring at their computers.
As a result, swing traders can avoid these mistakes by using a well-designed strategy that allows them to make a profit even on bad trades.
Swing traders can manage their trades while working a full-time job, unlike day traders. Swing traders must be able to manage their positions over a longer time period, which may result in poor performance.
Those who have day jobs can’t afford to trade the same way as day traders. They also don’t enjoy staring at their screens all day, which can lead to burnout and poor performance.
Conclusion – Day Trading Vs Swing Trading vs Position Trading
What is the best trading style for you? For most traders, we recommend following a swing trading strategy because most traders have full-time jobs. We personally take day trades plus swing trades. We don’t like position trading.
