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Day Trading vs. Swing Trading vs. Position Trading

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  • First Post: Apr 12, 2007 10:46pm Apr 12, 2007 10:46pm
  •  Daemien
  • | Joined May 2006 | Status: The Number of the Beast! | 395 Posts
Hello fellow dreamers,

The subject for today is the same as the title of this thread!!! Day vs. Swing vs. Position Trading - Which style do you use, and which style SHOULD you be using!

For those not in the know, I will go through a simple explanation of each:

Day Trading:

Also known as 'Intraday', positions are usually entered & exited within the same trading day. Obviously scalping fits into this category. Traders in general are interested in quicker, smaller amounts and making multiple trades per day.

Swing Trading:

Swing trading is typically a short to intermediate term trend following system lasting anywhere from 1 to 30 days. Traders who swing trade typically look for trend reversals & retracements for their entry/exit points.

Position Trading:

Position trading, also known as 'trend trading', can best be described as a 'buy and hold' method. Positions can be open for a few days, a few weeks, a few months or longer. They are also held during periods of minor retracement with the expectation that they will eventually continue trending in the desired direction.

---

With that out of the way, let's look at some of the pros & cons of each of these types of trading. I know I won't get them all, so please feel free to add your own ideas of pros/cons, or your own opinions if you disagree. We can update this list as we go...

Intraday Trading

Pros:
- Smaller take profit target = Smaller risk per trade.
- Because of the amount of trades being placed, compounding has a greater effect on your overall profits.
- You can make money faster.
- Makes you 'Feel Good'. Can be a rush! (Is this really a pro?)
- Allows you to always be actively participating in the market (Is this a pro?)
- Because of the last two, traders can exhibit addictive behaviour (gambling).
- Because most positions are closed out at the end of the day, able to take advantage of interest earned in their account.
- Risk control - positions are closed out overnight so unexpected market changes will not affect your bottom line.

Cons:
- Spread has a larger effect on your overall profits.
- You can lose money faster.
- Very difficult to learn - by some estimates less than 1% of traders become successful.
- Time consuming - very difficult to trade properly if you have a full-time job.
- Fast pace & necessary concentration can make day trading very stressful.
- Extremely Risky! Traders can lose a substantial amount of money in a very short period of time.
- Discipline, proper money management, risk/reward and a profitable system are a lot more important when day trading. Even a small mistake can result in a huge loss.
- Can be harder to predict the market.


Swing Trading

Pros:
- Manageable take profit and stop losses.
- Easier to learn than day trading - higher success rate than day trading.
- Spread has less of an impact into overall profits than day trading.
- Less time involved in actively trading - it is not necessary to 'babysit' your trades.
- Can be worked around a regular job - a couple of hours per day should suffice.
- Less stressful than intraday trading.

Cons:
- Can be difficult to learn and become profitable.
- While it requires less time than day-trading, preparation and analyzing the markets is still necessary and can be time consuming. Tending your positions daily is a must!
- Some traders have a tendency to develop emotional attachments to a trade.
- Discipline and keeping emotions in check are very important. It is not uncommon to exit on a retrace or trend change only to have the market immediately change back and head in the original direction.

Position Trading

Pros:
- The most forgiving type of trading - small mistakes are more easily absorbed in market movement and the size of your eventual profit.
- The easiest to learn. It is estimated that up to 25% of position traders learn to become profitable.
- Less stressful than intraday or swing trading.
- Easier to become successful with smaller startup capital.
- Much easier to predict the market as in general you will be following the overall trend.
- In general position trading is the most profitable.
- Less time consuming than day trading.

Cons:
- Compounding has a lot less effect on profit than both intraday and swing trading.
- Because positions can be highly leveraged and trades remain open for extended periods of time, unable to reap consistent benefits of interest.
- There is inherent risk in keeping positions open over night. It is quite possible for drastic changes to occur in the market while you sleep.
- Money can be tied up for an extended period of time. This can prevent entry into new positions as they arise.
- Because of the length of time involved in position trading, traders can experience significant drawdown with the expectation that it will turn around and start trending back in the desired direction. Psychologically this can have a very negative effect.



SUMMARY

While position trading is more profitable, day trading is less risky. The emotional element (discipline and self control) is also of more significance while day trading. The higher the time-frame, the better the chance to succeed and become profitable overall.


Which style appeals to you? Which are you now actively trading? Do you think some changes should be made???

Let's discuss...

D.
  • Post #2
  • Quote
  • Apr 13, 2007 12:11am Apr 13, 2007 12:11am
  •  ch33z3
  • | Joined Apr 2006 | Status: Dairy Master | 96 Posts
Swing trading style FTW!!! K.I.S.S.
TF: D
ENTRY: Engulfing Pattern w/ SRDC I in the direction of trend.
EXIT: SL=ATR/2 or Break of previous bars low/high
MM: Partial Profit at ATR/2, SL to breakeven. Ride the rest.
 
 
  • Post #3
  • Quote
  • Apr 13, 2007 12:20am Apr 13, 2007 12:20am
  •  don perry
  • | Joined Jun 2006 | Status: Pipoholic! | 307 Posts
day and swing trading. Day trading IMHO requires very low spread...like ECN
 
 
  • Post #4
  • Quote
  • Apr 13, 2007 12:50am Apr 13, 2007 12:50am
  •  zamakhtar
  • | Joined Jan 2007 | Status: Member | 68 Posts
Swing trading is my preferred way
Though I don't understand your point about interest. It would seem to me that position trading has the greatest interest accumulation if you are holding the currency with the higher interest rate for a long time.
 
 
  • Post #5
  • Quote
  • Apr 13, 2007 1:27am Apr 13, 2007 1:27am
  •  goodness
  • | Joined Apr 2007 | Status: Member | 247 Posts
Quoting Daemien
Disliked
Hello fellow dreamers,

The subject for today is the same as the title of this thread!!! Day vs. Swing vs. Position Trading - Which style do you use, and which style SHOULD you be using!

For those not in the know, I will go through a simple explanation of each:

Day Trading:

Also known as 'Intraday', positions are usually entered & exited within the same trading day. Obviously scalping fits into this category. Traders in general are interested in quicker, smaller amounts and making multiple trades per day.

Swing Trading:

Swing trading is typically a short to intermediate term trend following system lasting anywhere from 1 to 30 days. Traders who swing trade typically look for trend reversals & retracements for their entry/exit points.

Position Trading:

Position trading, also known as 'trend trading', can best be described as a 'buy and hold' method. Positions can be open for a few days, a few weeks, a few months or longer. They are also held during periods of minor retracement with the expectation that they will eventually continue trending in the desired direction.

---

With that out of the way, let's look at some of the pros & cons of each of these types of trading. I know I won't get them all, so please feel free to add your own ideas of pros/cons, or your own opinions if you disagree. We can update this list as we go...

Intraday Trading

Pros:
- Smaller take profit target = Smaller risk per trade.
- Because of the amount of trades being placed, compounding has a greater effect on your overall profits.
- You can make money faster.
- Makes you 'Feel Good'. Can be a rush! (Is this really a pro?)
- Allows you to always be actively participating in the market (Is this a pro?)
- Because of the last two, traders can exhibit addictive behaviour (gambling).
- Because most positions are closed out at the end of the day, able to take advantage of interest earned in their account.
- Risk control - positions are closed out overnight so unexpected market changes will not affect your bottom line.

Cons:
- Spread has a larger effect on your overall profits.
- You can lose money faster.
- Very difficult to learn - by some estimates less than 1% of traders become successful.
- Time consuming - very difficult to trade properly if you have a full-time job.
- Fast pace & necessary concentration can make day trading very stressful.
- Extremely Risky! Traders can lose a substantial amount of money in a very short period of time.
- Discipline, proper money management, risk/reward and a profitable system are a lot more important when day trading. Even a small mistake can result in a huge loss.
- Can be harder to predict the market.


Swing Trading

Pros:
- Manageable take profit and stop losses.
- Easier to learn than day trading - higher success rate than day trading.
- Spread has less of an impact into overall profits than day trading.
- Less time involved in actively trading - it is not necessary to 'babysit' your trades.
- Can be worked around a regular job - a couple of hours per day should suffice.
- Less stressful than intraday trading.

Cons:
- Can be difficult to learn and become profitable.
- While it requires less time than day-trading, preparation and analyzing the markets is still necessary and can be time consuming. Tending your positions daily is a must!
- Some traders have a tendency to develop emotional attachments to a trade.
- Discipline and keeping emotions in check are very important. It is not uncommon to exit on a retrace or trend change only to have the market immediately change back and head in the original direction.

Position Trading

Pros:
- The most forgiving type of trading - small mistakes are more easily absorbed in market movement and the size of your eventual profit.
- The easiest to learn. It is estimated that up to 25% of position traders learn to become profitable.
- Less stressful than intraday or swing trading.
- Easier to become successful with smaller startup capital.
- Much easier to predict the market as in general you will be following the overall trend.
- In general position trading is the most profitable.
- Less time consuming than day trading.

Cons:
- Compounding has a lot less effect on profit than both intraday and swing trading.
- Because positions can be highly leveraged and trades remain open for extended periods of time, unable to reap consistent benefits of interest.
- There is inherent risk in keeping positions open over night. It is quite possible for drastic changes to occur in the market while you sleep.
- Money can be tied up for an extended period of time. This can prevent entry into new positions as they arise.
- Because of the length of time involved in position trading, traders can experience significant drawdown with the expectation that it will turn around and start trending back in the desired direction. Psychologically this can have a very negative effect.



SUMMARY

While position trading is more profitable, day trading is less risky. The emotional element (discipline and self control) is also of more significance while day trading. The higher the time-frame, the better the chance to succeed and become profitable overall.


Which style appeals to you? Which are you now actively trading? Do you think some changes should be made???

Let's discuss...

D.
Ignored
how do position traders set thier stop loss if they hve have any??
 
 
  • Post #6
  • Quote
  • Apr 13, 2007 3:50am Apr 13, 2007 3:50am
  •  JoshDance
  • | Joined Mar 2007 | Status: Member | 606 Posts
Quoting Daemien
Disliked
SUMMARY

While position trading is more profitable, day trading is less risky. The emotional element (discipline and self control) is also of more significance while day trading. The higher the time-frame, the better the chance to succeed and become profitable overall.
Ignored
I would rather say that neither method is less or more risky, or less or more profitable, but rather the trader determines the risk and profitibility. Saying that day trading is less risky just seems backwards to me. Trading long term with the trend is really the least risky, isn't it? Trying to predict what will happen next hour is much more prone to a variety of fluctuations than what will happen next week, if a trend is well established...?
 
 
  • Post #7
  • Quote
  • Apr 13, 2007 7:51am Apr 13, 2007 7:51am
  •  hilmy83
  • Joined Jun 2006 | Status: Do NOT tilt | 5,708 Posts
swing and position...and in a few years maybe..intraday..(no shorter than 1 hr though.hehe
Working towards CME membership
 
 
  • Post #8
  • Quote
  • Apr 13, 2007 7:55am Apr 13, 2007 7:55am
  •  don perry
  • | Joined Jun 2006 | Status: Pipoholic! | 307 Posts
i see 15m scalps everyday on many pairs esp jpy and chf pairs. the problem is i cant take them cuz of spread.
 
 
  • Post #9
  • Quote
  • Apr 13, 2007 9:59am Apr 13, 2007 9:59am
  •  amenlo9
  • | Joined May 2006 | Status: Member | 600 Posts
for me,position trading is even stressful because we have to hold our position for very long period.
 
 
  • Post #10
  • Quote
  • Apr 13, 2007 10:11am Apr 13, 2007 10:11am
  •  dawnrenee2000
  • | Joined Nov 2006 | Status: Dancing with the Market | 22 Posts
I have been trading for about a year now. I have from the beginning of trading studied heavily and only done Day trading, to be more exact Intraday. But now I am starting to branch out and currently have several positions open for the first time that I plan to run for several weeks or more if needed. I wanted to get a feel for the psychology of the different type of trading as well as go for a larger profit on these trades. I dont know that Position trading will ever be for me , but mixing my day trading with some swing trading could be a move in the right direction.
 
 
  • Post #11
  • Quote
  • Apr 14, 2007 9:28am Apr 14, 2007 9:28am
  •  Daemien
  • | Joined May 2006 | Status: The Number of the Beast! | 395 Posts
Hi Zamakhtar,

I was referring to basic interest earned in the account, not swap interest (which can be negative). In my experience when you are trading both with and against the overall trend (utilizing the smaller trends that swing trading takes advantage of) your carry positions tend to even out in the end.

And you are right about position trading - if you are holding a pair in the right direction swap interest will definitely add to your account! What happens if the trend is giving negative swap interest? I think that over the long-term this should even out...

Thanks for the input,

D.


Quoting zamakhtar
Disliked
Swing trading is my preferred way
Though I don't understand your point about interest. It would seem to me that position trading has the greatest interest accumulation if you are holding the currency with the higher interest rate for a long time.
Ignored
 
 
  • Post #12
  • Quote
  • Apr 14, 2007 9:31am Apr 14, 2007 9:31am
  •  Daemien
  • | Joined May 2006 | Status: The Number of the Beast! | 395 Posts
I would say that depends on method being used. If you go to weekly charts and zoom out, you will notice a very well defined trend on most currency pairs. This can be considered to be the overall trend of that pair (bullish/bearish). I am testing a system that places the s/l beneath this which makes it possible to go very high into the negative depending upon your entry. The reward should offset this tho...

Anybody else have a good stop-loss system for position trades??

D.


Quoting goodness
Disliked
how do position traders set thier stop loss if they hve have any??
Ignored
 
 
  • Post #13
  • Quote
  • Apr 14, 2007 9:42am Apr 14, 2007 9:42am
  •  Daemien
  • | Joined May 2006 | Status: The Number of the Beast! | 395 Posts
Hi Josh,

I probably should have clarified the risk part: Day trading has better 'risk-control' so has less inherent risk. You are not holding positions overnight so you limit your exposure to events beyond your control which can tank your account. Some pros have gone from longer-term trading to intraday because of this.

As for which is more or less profitable, in my opinion the fact that day-trading has such a high failure rate makes the other options more viable and hence, more profitable for the majority of traders.

Just my .02c!

D.

Quoting JoshDance
Disliked
I would rather say that neither method is less or more risky, or less or more profitable, but rather the trader determines the risk and profitibility. Saying that day trading is less risky just seems backwards to me. Trading long term with the trend is really the least risky, isn't it? Trying to predict what will happen next hour is much more prone to a variety of fluctuations than what will happen next week, if a trend is well established...?
Ignored
 
 
  • Post #14
  • Quote
  • Apr 14, 2007 9:48am Apr 14, 2007 9:48am
  •  Daemien
  • | Joined May 2006 | Status: The Number of the Beast! | 395 Posts
Yes it is the intraday trading on the low timeframes that has eluded me so far. I can follow a system to the T, but they all seem to end up in the negative overall.

And is it just me or is it harder to find a good (working) risk/reward ratio the smaller the timeframe??



D.

Quoting hilmy83
Disliked
swing and position...and in a few years maybe..intraday..(no shorter than 1 hr though.hehe
Ignored
 
 
  • Post #15
  • Quote
  • Apr 14, 2007 9:49am Apr 14, 2007 9:49am
  •  Daemien
  • | Joined May 2006 | Status: The Number of the Beast! | 395 Posts
I think that's where I am failing in the small timeframes. The spread eats up so much of your profits - IBFX is 4pips on average for most small spread pairs. The really low ones (EURUSD) barely seem to move on the 1 & 5m charts.

D.


Quoting don perry
Disliked
i see 15m scalps everyday on many pairs esp jpy and chf pairs. the problem is i cant take them cuz of spread.
Ignored
 
 
  • Post #16
  • Quote
  • Apr 14, 2007 9:53am Apr 14, 2007 9:53am
  •  Daemien
  • | Joined May 2006 | Status: The Number of the Beast! | 395 Posts
I think that having a good system with well defined stops & take profits should help here! Trusting your system comes with backtesting & live trading... at least this is what I am finding!!

D.


Quoting amenlo9
Disliked
for me,position trading is even stressful because we have to hold our position for very long period.
Ignored
 
 
  • Post #17
  • Quote
  • Apr 14, 2007 9:53am Apr 14, 2007 9:53am
  •  luqmanz
  • | Joined Nov 2006 | Status: Member | 690 Posts
Lol my style is not listed. I hold position usually less than 5 days but only in the direction of position trade. Not really swing but not really position trading.

I spend 10 mins a day using daily charts.
 
 
  • Post #18
  • Quote
  • Apr 14, 2007 9:58am Apr 14, 2007 9:58am
  •  Daemien
  • | Joined May 2006 | Status: The Number of the Beast! | 395 Posts
Well good luck with that!! In any financial endeavour it is almost always a good idea to branch out and diversify your holdings. I think that more than applies to trading.

It's the possibility of larger winning positions that fuel me. Closing out with a 1000+ pip gain sure would feel good!!!

D.




Quoting dawnrenee2000
Disliked
I have been trading for about a year now. I have from the beginning of trading studied heavily and only done Day trading, to be more exact Intraday. But now I am starting to branch out and currently have several positions open for the first time that I plan to run for several weeks or more if needed. I wanted to get a feel for the psychology of the different type of trading as well as go for a larger profit on these trades. I dont know that Position trading will ever be for me , but mixing my day trading with some swing trading could be a move in the right direction.
Ignored
 
 
  • Post #19
  • Quote
  • Apr 14, 2007 10:00am Apr 14, 2007 10:00am
  •  Daemien
  • | Joined May 2006 | Status: The Number of the Beast! | 395 Posts
Sounds profitable!!! Love the daily prep time too hehehe

I'm spending a whack of time learning this now in the hopes of being able to cut it down to minimal time per day in the future - that's my dream!!!

Take care,

D.



Quoting luqmanz
Disliked
Lol my style is not listed. I hold position usually less than 5 days but only in the direction of position trade. Not really swing but not really position trading.

I spend 10 mins a day using daily charts.
Ignored
 
 
  • Post #20
  • Quote
  • Jun 26, 2007 9:30am Jun 26, 2007 9:30am
  •  FxJarhead
  • | Joined Feb 2007 | Status: Member | 447 Posts
Quoting Daemien
Disliked
Hello fellow dreamers,

The subject for today is the same as the title of this thread!!! Day vs. Swing vs. Position Trading - Which style do you use, and which style SHOULD you be using!

For those not in the know, I will go through a simple explanation of each:

Day Trading:

Also known as 'Intraday', positions are usually entered & exited within the same trading day. Obviously scalping fits into this category. Traders in general are interested in quicker, smaller amounts and making multiple trades per day.

Swing Trading:

Swing trading is typically a short to intermediate term trend following system lasting anywhere from 1 to 30 days. Traders who swing trade typically look for trend reversals & retracements for their entry/exit points.

Position Trading:

Position trading, also known as 'trend trading', can best be described as a 'buy and hold' method. Positions can be open for a few days, a few weeks, a few months or longer. They are also held during periods of minor retracement with the expectation that they will eventually continue trending in the desired direction.

---

With that out of the way, let's look at some of the pros & cons of each of these types of trading. I know I won't get them all, so please feel free to add your own ideas of pros/cons, or your own opinions if you disagree. We can update this list as we go...

Intraday Trading

Pros:
- Smaller take profit target = Smaller risk per trade.
- Because of the amount of trades being placed, compounding has a greater effect on your overall profits.
- You can make money faster.
- Makes you 'Feel Good'. Can be a rush! (Is this really a pro?)
- Allows you to always be actively participating in the market (Is this a pro?)
- Because of the last two, traders can exhibit addictive behaviour (gambling).
- Because most positions are closed out at the end of the day, able to take advantage of interest earned in their account.
- Risk control - positions are closed out overnight so unexpected market changes will not affect your bottom line.

Cons:
- Spread has a larger effect on your overall profits.
- You can lose money faster.
- Very difficult to learn - by some estimates less than 1% of traders become successful.
- Time consuming - very difficult to trade properly if you have a full-time job.
- Fast pace & necessary concentration can make day trading very stressful.
- Extremely Risky! Traders can lose a substantial amount of money in a very short period of time.
- Discipline, proper money management, risk/reward and a profitable system are a lot more important when day trading. Even a small mistake can result in a huge loss.
- Can be harder to predict the market.


Swing Trading

Pros:
- Manageable take profit and stop losses.
- Easier to learn than day trading - higher success rate than day trading.
- Spread has less of an impact into overall profits than day trading.
- Less time involved in actively trading - it is not necessary to 'babysit' your trades.
- Can be worked around a regular job - a couple of hours per day should suffice.
- Less stressful than intraday trading.

Cons:
- Can be difficult to learn and become profitable.
- While it requires less time than day-trading, preparation and analyzing the markets is still necessary and can be time consuming. Tending your positions daily is a must!
- Some traders have a tendency to develop emotional attachments to a trade.
- Discipline and keeping emotions in check are very important. It is not uncommon to exit on a retrace or trend change only to have the market immediately change back and head in the original direction.

Position Trading

Pros:
- The most forgiving type of trading - small mistakes are more easily absorbed in market movement and the size of your eventual profit.
- The easiest to learn. It is estimated that up to 25% of position traders learn to become profitable.
- Less stressful than intraday or swing trading.
- Easier to become successful with smaller startup capital.
- Much easier to predict the market as in general you will be following the overall trend.
- In general position trading is the most profitable.
- Less time consuming than day trading.

Cons:
- Compounding has a lot less effect on profit than both intraday and swing trading.
- Because positions can be highly leveraged and trades remain open for extended periods of time, unable to reap consistent benefits of interest.
- There is inherent risk in keeping positions open over night. It is quite possible for drastic changes to occur in the market while you sleep.
- Money can be tied up for an extended period of time. This can prevent entry into new positions as they arise.
- Because of the length of time involved in position trading, traders can experience significant drawdown with the expectation that it will turn around and start trending back in the desired direction. Psychologically this can have a very negative effect.



SUMMARY

While position trading is more profitable, day trading is less risky. The emotional element (discipline and self control) is also of more significance while day trading. The higher the time-frame, the better the chance to succeed and become profitable overall.


Which style appeals to you? Which are you now actively trading? Do you think some changes should be made???

Let's discuss...

D.
Ignored
All 3 have their place, I trade all of them.....though my preferred is day trading. I day the eur/usd,gpd/usd and usd/chf....swing what ever has opp, and position in cad/jpy, aud/jpy, eur/gpd , usd/jpy, and gpd/jpy as examples....though this could change as markets change.
Proper Prior Planning Prevents Piss Poor Performance
 
 
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