Stock Trading Platforms

Swing Trading or Day Trading - Which is Best?

Among a new trader's first decisions is the choice between two stock trading platforms. And by this I mean the choice between swing trading and day trading. There's a lot of passion in this debate and there is some confusion between these stock trading terms. Day traders think they rule the roost because they can move in and out of stocks quickly, picking up quick gains wherever they please. Swing traders consider this far too risky and think a slower pace of trading is more profitable. So, how do you determine which is best?

Well, first let's get our stock trading terms straight. A day trade is any round trip trade made in the same business day. In other words, it means you buy and sell, or short and cover, the same stock in the same day. A swing trade is any trade held overnight, but generally no longer than a few months. How the trader approaches the market is greatly determined by this choice between stock trading platforms. So which is better?

The answer: it depends. In this article I want to discuss the merits and limitations of both stock trading platforms. First a confession. I do both. My main emphasis is on day trading. Of the two stock trading platforms, I find that I'm most comfortable and successful as a day trader. But I will sometimes hold a stock for longer than one day, IF this was my intention for that trade from the start. (I do not turn a day trade into a swing trade just because it didn't go my way. That's an important point.) So, there is nothing that says you have to go only one way or the other, although I know some brokers will allow you crazy amounts of margin (10X) if you day trade only.

Equity. So let's get into it. What are the benefits of swing trading vs. day trading? For starters, some of the decision may be made for you. In order to execute more than three same-day, round trip trades in a five-day period, you must have $25,000 in equity in your trading account. So, some traders are forced to swing trade by this fact alone. Or they must simply limit their number of trades per week. Swing traders, on the other hand, do not have any such requirements. And this means a person with $2000 can still start trading and learning how the market works.

Time. Another key issue is time. A day trader is available between the hours of 9:30 AM and 4:00 PM Eastern. Day trading requires a close watch of the stock charts because a trade may last anywhere from one minute to five hours in length. The day trader must have ready access to a computer in order to execute both sides of the transaction. For this reason, a person who currently works during those hours is forced into swing trading. Since the swing trade is a longer trade, trades can be executed with only a few minutes of time during market hours. And pre-market and after-market trading is also an option for the swing trader.

ROI. ROI equals Return on Investment. This is a point a lot of traders don't even consider. Let's say you meet the money and time requirements to be a day trader. But, every time you do it you lose money. As much as you'd like to sit at home and make a living day trading, you just can't master the trade. But, let's say you have a talent for analyzing the broader market and your interpretation of market trends is very accurate. Well, even though you "qualify" as a day trader, you might be better off as a swing trader. Even though you are available during the day time hours, maybe that time would be better spent studying the market and individual companies rather than trying to trade in and out of a stock on the same day. So, I would challenge you to compare your Average Return Per Trade. To do this, simply take the profit/loss of each trade you've executed and divide it by the number of days you held the stock. Then compare the results between your swing trades and your day trades. If you discover your losses are lower and your gain per day is higher as a swing trader, then go with your strengths (or learn how to be a better day trader!).

Personality. It is also true that some personalities work better with certain stock trading platforms. Some personalities just don't mesh well with day trading. If you are a compulsive gambler, then day trading could break your bank. Your lack of discipline will wilt your account. So stay away from it. If you are holding a trade overnight and you can't sleep because you're so worried about what will happen the next day (not to mention the next week), then swing trading is probably not for you. So, once you've examined all of the other factors, take a look at your personality, what you enjoy, what causes you stress, etc. And then go with what works for you.

Of course, you can always do both. Or, if your current equity amount is too small for day trading full time, then do it a few times a week or swing trade while you're learning how to trade. Trust me, there's a lot to learn if you're just getting started.

Note. Your choice of a stock trading platform will determine your techinical indicator settings. Day trading, for example, requires a closer ratio on many settings, such as RSI, MACD, Stochastics, etc.

When you searched for stock trading platforms, if you were more interested in stock charting services, then click on this link: stock trading platforms - charting services.

If you want to learn more about stock trading terms, then click on this link: stock trading terms.