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Which is better? After years and years, I really can’t say which is better. Personally, I prefer swing trading because it only takes a few hours of my time per week. Yes, you read that correctly, not per day, per week.
Big picture, much more money is deployed from hedge funds/mutual funds over a longer term and more profits have been generated over the past 50 years through traditional “buy and hold investing”, not on a five minute or one minute day trading stock chart because they build positions of millions and millions of shares over a period of many months. Swing trading fits in between the Warren Buffet long term buy and hold investing and day trading.
My story…
I have friends that do both swing trading and day trading who would argue their personal preference, but keep in mind, their preference is also where they spend the most of their time and have the most experience.
I started out day trading and after six months of consistently losing money on various/popular strategies that stock trading gurus promote, like breakouts and the ORB (opening range breakout), I switched to swing trading.
Swing trading…
It’s taken me years to figure out the trick is to know which strategies to use in which market environments, some strategies lose when the market goes sideways while other strategies work best in sideways/ranging markets. Strategies that work well when the market is selling off don't work well when the market is pushing new highs, so it’s important to have an idea of which strategies to use, almost like a portfolio of strategies to know when to deploy some strategies and when to keep others on the sidelines. To do that, I look at SPY & QQQ charts daily to see the overall climate of the market.
30 minutes before the closing bell near the end of the trading day, I am adjusting stock positions and placing new orders. I often have dozens of open orders waiting for my favorite stocks to go lower and I’m buying in four tranches (four predefined levels I buy 10%, 20% 30% and 40% of the shares I want). After all four orders are filled, I have 100% of the shares I wanted and each order brings the average price lower and lower and because my 40% shares order is the lowest price, it has the biggest impact on my average cost.
I prefer “trend following” and “position trading” strategies -- they have served me well over the past many years. Right before the end of the trading day, I’m scrolling through my open stock/options positions to see if I need to close them for profits, or buy put options to “insure” a position that is moving against me.
I use a risk management strategy known as “Trading an R” (risk unit). My friends and I can compare scores on a monthly basis — even though we have different size trading accounts. Essentially, I decide how much money I am willing to lose before placing a trade, assuming it may be 50/50 odds I win/lose, ultimately time will tell. I may deploy $50–100k on one trade, but only willing to “lose” $2,000. There is a difference between spend and risk. I am spending $50-100k, but again only risking $2,000.
Day trading is…
What I used to do, you have to spend far more time in front of a computer. Typically, you are analyzing pre-market “gaps” between where a stock is set to open and where it closed the day before.
Summary
At the end of the day, you have to decide if you want the fast-paced action of day trading or the slow and steady (almost boring) action of swing trading. There are advantages and disadvantages to both, you need to find which better fits your personality & your schedule. Plenty of people try day trading and love it, plenty do a mix of both.
At the end of the day, both types of trading require different strategies and both types require having a cool head, emotions in check, risk management in place and being able to execute your plan.
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