However, your broker might require you to maintain a specific amount of capital in your account. So, you could make 3% on your account balance in a typical month, reflecting the fewer fees. Over the year, that comes out to about 36%, which sounds good but offers less potential than a day trader’s potential earnings. As mentioned above, swing trading is a middle ground between day trading and long-term investing. The investing information provided on this page is for educational purposes only.

If expecting a longer correction, the swing trader might want to set a take profit (TP) order at the blue zone. Once reached, the trader sets a portion of the https://www.bigshotrading.info/blog/bull-flag-pattern-bullish-and-trading-strategies/ profits aside and places the remaining funds into a long position at the same zone. A swing trader averages anywhere from three-to-six trades per week.

Swing Trading vs. Day Trading

Instead of reporting to a firm or following a company’s trading directions, any investor with enough personal capital can trade when they want, working as flexible a schedule as global markets allow. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money. They are paid by either long or short traders, depending on the difference between futures and spot prices.

• Similarly, it accompanies a critical degree of chance for day traders to fail and can be sincerely burdening.
• Swing traders, particularly those just starting out, should ensure they have a solid understanding of the technical indicators, as well as the market fundamentals, that are informing their trade decisions.
• For example, if you take a long position (buy), you will want to see a reasonably priced valuation, strong earnings, and a healthy balance sheet.
• Day trading is stressful and intense; it requires understanding technical trading charts and emotional intelligence.
• As swing trading is a form of short-term trading​, it is essential that traders are experienced in the analysis of price charts and trending waves in order to determine appropriate entry and exit points.
• While most traders share the same goals, they achieve these goals using a variety of different trading styles.

While your position is open, there is an increased risk of changing conditions that result in your position no longer being successful. In addition, your capital is tied up in a single position for a longer period of time; you must be willing to be illiquid for periods of time until it is the appropriate time to exit your position. If you have a low risk tolerance, or if you don’t have sufficient risk capital, then you might want to avoid it altogether. But if you have the tolerance, risk capital, and willingness to learn to swing trade, you might find it a valuable skill that could potentially supplement your longer-term investments.

Swing Trading Tactics

The market price goes lower than a defined support level and the chart points toward lower prices. Technical indicators are mathematical calculations that use historical price data and volume data to provide insight into the potential swing trading vs day trading direction of a security. These indicators can be used to identify trends, gauge market sentiment, identify support and resistance levels and more. The vast majority of retail client accounts lose money when trading CFDs.