Intraday trading vs swing trading, what is the actual difference? – DailyO

In intraday trading, traders focus on extreme price fluctuations to make profits from multiple trades in a single day. In swing trading, traders may have lesser trades as compared to intraday trading and can focus on select stocks to observe them over time, and book more substantive and larger profits. 

What is intraday trading? Suppose your doctor tells you that you just have one more day to live and then you will be no more. Though you are unable to believe your doctor, you decide that you will make the most of your last day by making money from the stock market. You just have one day, you might as well make the most of it. (Quite an unusual decision but for now, go with this example) 

Intraday Trading is quite intense and risky. It needs you to be attentive every minute. (Photo: Getty Images).

So, according to your decision, you decide that on your last day that you will spend all hours between 9.15 am to 3.30 pm on the stock market and do your best to trade in stocks and make money. (Everything else like spending time with family and taking pictures will happen in the balance hours of the day).

You have Rs 10,000 in your bank account and you are willing to spend it all on making money in a day. So what will you do before the market opens and during the market hours? 

  • You will look at Youtube videos before the market opens to understand stock patterns.
  • You will Google ”Intraday Trading Strategies for this particular day”.
  • You will look at expert’s opinions in newspapers and Telegram channels where they provide fresh intraday trading strategies.
  • You will look to buy stocks at a lower price in the early hours of the day and intend to sell them before the market closes. Or you will look to sell stocks at a higher price and wait for them to fall so that you can buy at a cheaper rate and make money. 
  • You will ask a stock market-obsessed friend to do the stock’s technical analysis for you and help you execute stock trades so that you make the most money, before 3.30pm. 
  • You will buy and sell multiple stocks worth Rs 10,000 on the same day. By the end of the day, you might crash on your bed with sheer satisfaction, frustration, or plain indifference.  

Here, you just behaved like an intraday trader. If you are an intraday trader, your objective will be to make the most profits on the same day by:

  1. Making small profits on many trades
  2. Capping losses on unprofitable trades

Day traders do not keep any positions open for the next day. Which means if they buy shares, commodities or currencies during the market hours, they have to sell them on the same day and vice versa. Usually, day trading is for those who are passionate about trading full-time because they have to be quick on their toes and book profits and cut losses.

Day traders use state-of-the-art trading platforms and tools to use price fluctuations to their advantage and buy and sell large quantities of the stock, to ensure sufficient profits. So even if the stock price changes by 5-7% in a day, traders can buy stocks in thousands of quantities and multiply their profits.  

What is Swing trading? Now, suppose you have a long life and you don’t need a doctor for anything. You have a nice job that gives you steady money and you decide that since you want to make more money, you will learn to trade in stocks in a month’s time. After you learn more about stock trading and get some idea of stock patterns and trends, you decide to get into trading as a part-time side hustle. 

In swing trading, you can buy and sell stocks over a period of time, which is weeks and months. Unlike day trading, where there is intense pressure to close open positions on the same day, in swing trading, you can trade based on your knowledge and skills over time.   

The idea here is to find fundamentally strong stocks and observe them for price changes over a period of time and book larger profits over time. Fundamentally strong stocks are those that belong to companies that will do well irrespective of the economic conditions, like companies in the business of toothpaste, hospital services, steel manufacturing etc.

The logic here is that traders depend on time and technical analysis to make profits instead of price fluctuations. Unlike day trading where prices have to be constantly monitored, there can be some level of automation in swing trading as traders can set up ‘stop losses’. Since swing trading does not need you to be hooked on your screens at all times, traders usually operate on a part-time basis to conduct such trade. Traders don’t need high-tech trading platforms here, the reliance is more on momentum indicators and stock and market trends.

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