There is a wide variety of styles when it comes to trading; however the two most popular styles for future traders are day trading and swing trading.
Lets understand the differences between the styles so you can find the best one to fits your trading style, risk tolerance and trading goals. Every trader is completely different and for that reason one style is not better than the other.
Sleep better at night with Day Trading
Being a day trader probably takes a little bit more discipline than swing trader because traders have to follow one very strict rule: “no overnight positions.” Day traders should only trade during the most active session for their particular market, and be flat (have no positions) by the close of the markets . The biggest benefit to this style of trading is that traders don’t have to worry about market fluctuations in the due to overnight events.
Traders who have low risk tolerance might prefer a day trading strategy to avoid overnight risk.
However there are some drawbacks to this strategy and the biggest one being that the trader needs a much higher degree of focus and concentration when placing trades. This can be exhausting. Day traders must also adhere to the discipline of closing out trades before the close of the market, whether the trade is profitable or not.
Another drawback is that a day trader needs to have many trades and positions in a single day. Instead of waiting for one big move, a day trader is in and out relatively quickly in many different positions. If this is not done correctly by utilizing the proper tools and with proper skills, then the trader just ends up churning their account and wasting money on transaction fees.Also Day trading is the most difficult form of trading as most of traders take over leveraged positions are gets wiped out if market makes volatile move.
Take Advantage of the Momentum with Swing Trading
Swing trading is probably one of most common styles used by traders. Most swing traders would consider themselves day traders but that is actually incorrect, unless they close out their position at the end of the day. The goal of a swing trader is to take advantage of momentum in the marketplace and will hold on to the position until that momentum has run its course. True swing traders can hold a position for a few hours up to a few days. The best part is that once the momentum runs out in one direction traders can take advantage of the opposite trade.
Traders who are interested in maximizing their profits should also consider swing trading; however, there is a downside to this style, which is higher risk. The biggest risk for traders is the marketplace itself the volatility after hours can actually trigger stop-losses. The second major risk is reading the trend wrong. This happens when a trader jumps into a position to late. They end up chasing the market, one way and then the other, which can lead to big losses.
There is no fool-proof trading strategy it is important to remember that every trader will have both winning and losing trades. The goal of any good trader is to make sure that their profits are larger than their losses. The more comfortable a trader is with their trading style the easier it will be to make profits.
Most advanced traders will employ both day and swing trading strategies in their business, while newer traders should focus on perfecting 1 trading type before adding a 2nd.