By Daniel Bustamante, Co-Founder and Lead Coach
For beginner traders, it is easy to get caught up in the lingo of trading. What is better, what’s not etc., and one of those items is swing trading. It is a term that is thrown around a lot with no real definition as such.
What I mean is that different traders quantify swing trading based on different ideas, so I will just give you what we here at StockAbility™ consider swing trading. We define it as a 5-day or longer hold on any trade/investment you put on.
Swing Trading or Day Trading?
Now on to the next question. Which is better, swing trading or day trading? Well, there is no ‘right’ answer to this at all. This is personal preference for many traders, but I can tell you this as someone who has done this at a professional level for 15 + years that I prefer swing trading.
Why? In short-summary, I don’t like to jump in and out of trades or sit at the computer all day long. Swing trading for me is less stressful because I can look at a larger time frame and price target and allow the trade to get to that point. Now, I do trade a lot of futures (E-Mini and Crude Oil) so that is more day trading, but I do use swing trades there from time to time when appropriate.
In addition, I find that swing trading allows me to ‘mess with’ my trade less. What I mean by that is I don’t have to watch it every minute of the day, so I am less prone to deviating from my trade plan and price targets. For some of you, saving yourself from yourself may be key in your personal trading development. What I have found is that swing trading tends to alleviate many of the issues like over-trading and selling too early that many beginner traders have. The OptionsAbilities course is the perfect place to learn our simple, yet powerful swing trading tactics using options. In the example below, I would like to share with you a trade setup which was taken using the exact principles from the class:
Trade Duration: 30 Days
Trade Cost: $1,500
Trade Profit: $1,704 or 113.91%
February 20th I purchased 2 Square September call contracts at $7.45 apiece.
Total trade cost: $1,500 (2 X 7.50)
I sold that position today for $15.00 (or so) a contract for a total gain of $1,704 or 113.91%.
Why did I decide to make this a swing trade you might ask?
Well, that was determined based on the stock’s price chart. Based on my analysis (technical not fundamentals) I made the assessment that the stock could trade higher but would take time. Therefore, a swing trade.
So, whether you want to learn about day-trading, swing trading or maybe do both, just remember that there is no one that is ‘better’ than the other. It comes down to personal preference. I can tell you, however, that we see a better student success rate with those who swing trade v. attempting to day trade. It’s a question of discipline and following rules more than anything else. Some people are good with that, while others are not.
I hope this article helps,