Swing Trading vs Day Trading
Michael Guess
Day Trading Coaching and Mentoring Including Trading Strategies for People Who Want to Become Profitable Day Traders of the Markets.
Active trading takes advantage of short term swings in the prices of securities. Active traders fall into two basic groups, swing traders and day traders. In both cases, the trader seeks to profit from fluctuations in the price of commodities, futures, currencies, or stocks. The first difference between swing trading and day trading is that day traders open and close their trading positions within the same trading day while swing traders keep positions open for days, weeks, and sometimes for months. Every day holds profit potential in day trading as prices go up and down. The ups and downs average out over days and weeks. Thus, day trading holds greater profit potential for trading futures and commodities than does swing trading. In fact, day trading holds greater profit potential than may other approaches to the markets.
Day Trading vs Investing
The S&P 500 has gone up in value by an average of 10% to 11% a year since its inception in 1926. However, the market goes up and down. Thus money invested one year may result in losses for the next several years for an investor. A trader who successfully times the market can profit from both the rise and fall in futures prices, earn far more than 10% to 11% a year on average and make money when the market falls! The ultimate profit potential lies with day trading as traders have the opportunity to profit from daily swings that tend to average out over time. Day traders can also take advantage of swings in commodities and futures where the profit potential can be many times that of any long term investment.
Day Trading vs Options
While day trading uses technical analysis and charting systems to profit from one or more trades every day, option trading focuses on hedging risk. The flip side of option hedging strategies is that they tend to limit profits as well. In that sense, option trading is like long term investing in that the trader gives away potential profits. Day trading of futures, commodities, currencies, and stocks offers better profit potential. Day trading futures and commodities provides tax advantages not seen when swing trading stocks.
Day Trading vs Forex
Futures day traders profit from daily price changes of commodity and index futures contracts while Forex traders buy and sell currency pairs. You can day trade Forex pairs. However, currency pairs are less volatile than commodity futures. Because volatility is where profits come from, Forex trading holds less profit potential than trading commodity futures. Everything from geopolitics and natural disasters to issues of liquidity affects commodities. Day traders who keep their finger on the pulse of a given commodity can earn more profits than by trading currencies where price movements are generally less dramatic.
Day Trading vs Index Funds
Many investors invest in ETFs that track indexes like the S&P 500.These investment vehicles have tended to do better than “managed” investment accounts or mutual funds and come with lower fees and commissions. However, they are simply an efficient way to invest in the stock market. The same arguments that apply to day trading vs investing apply to day trading vs index funds from the investment side. There is more profit potential in day trading, including day trading indexes, than in long term investing. That is because day trading holds the potential for profit on every single swing up or down in commodity futures or other securities.
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Day Trading vs Mutual Funds
Mutual funds are a passive way to invest. Many people who do not have the expertise, time, or interest in investing put their money into mutual funds. Mutual funds charge for managing your money and commonly do not do as well as ETFs that track indexes like the S&P 500. This issue aside, mutual funds are an investment vehicle. While your money in a mutual fund may appreciate a few percent per year on the average, you are missing out on the profit potential provided by the daily ups and downs of commodity futures, index futures, and even from day trading stocks or Forex.
Scalping vs Day Trading
Day trading is the buying and selling of securities like commodity futures within a single trading day. Traders look for technical analysis cues to guide them in spotting upward and downward movements. A trader will establish a position, set their stop loss targets, and profit as the security goes up or down. They will always close out the position before the end of the trading session. The point is to profit from price swings within the trading day. Scalping is a day trading strategy in which the trader makes many trades every day taking tiny profits many times a day. While the usual day trader will commonly make a trade or two a day, scalpers may make hundreds of trades. While both approaches require attention to trades in progress, standard day traders can protect themselves with stop loss settings. Scalpers work a lot harder and need to pay attention all day long in order to make money using this approach.
Forex vs Futures Day Trading
The mechanics of day trading Forex or futures are generally the same. The trader follows price swings of a commodity like gold or coffee on one hand or the GBP USD currency pair on the other using technical analysis tools. Because Forex pairs are driven by political and monetary events and decisions in two countries, movements in currency rates tend to happen during daytime hours in the countries whose currencies are traded. This may require the trader to trade the London or Tokyo markets instead of the New York market which means working a “second or third shift.” Trading commodity futures takes place nearly 24 hours a day which negates the need for “third shift” work. Many choose commodity futures day trading over Forex trading because the commodity markets offer greater intra-day volatility and thus great potential for profits.
Successful day trading happens when you?learn the skills from an expert?like DayTradeSafe, exercise discipline, and use an advanced trading platform like?Ninja Trader.
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