Is swing trading the same as day trading?

Swing trading - Big profits on the stock exchanges with little expenditure of time

Swing trading is an interesting trading strategy for anyone who wants to profit from fluctuations on the stock market with little expenditure of time.
I am not a fan of formal definitions and I find that difficult to differentiate.

So in this article, we'll just look at the practice. I will show you where the differences are between day trading and swing trading, what special features there are, which markets you can trade and give you specific tips for implementing a swing trading strategy.

Day trading vs. swing trading

Let's start with the theoretical distinction between swing trading and day trading.

In day trading, positions are usually closed within one trading day, whereas in swing trading they are held for several days, weeks or even months.

However, we are not interested in the delimitation and definitions here. In principle, there are more similarities than differences, which is why we are also discussing swing trading here. Similar mechanisms and strategies can be used and with both the chart analysis forms an important basis for trading decisions.

The main differences are:

  • Swing trading is usually more long-term (holding times of several days, weeks or years)
  • With swing trading, trading is therefore more likely to take place on significantly higher time units in the chart, H4, D1 or even W1 and M1
  • While day trading is almost exclusively leveraged due to the smaller fluctuations, swing trading can also be interesting without leveraged financial products
  • The longer holding periods result in some advantages such as lower fees because less trading takes place, the time required is less and it is a little easier, I would say, because the longer time units help to avoid many beginner mistakes, such as impulsive trading
  • The longer hold time in swing trading makes news more relevant and unpredictable events pose a risk
  • If the positions are held for several days, the risk increases due to price gaps
  • Otherwise, I hardly see any disadvantages, it is simply a different style of trading. Some would see it as a disadvantage that the return opportunities are lower, but return always comes from risk and so I don't see that as a disadvantage, just as a different approach

So swing trading is a great thing that you can do in parallel with day trading.

The markets and financial products

For the swing trading strategies In theory, all financial products are suitable, i.e. stocks, CFDs, currencies, commodities or even options.

Derivatives on indices such as a future or CFD on the DAX, S & P500 and others can also be traded.

If you want to use leveraged financial products such as CFDs for swing trading, you should keep in mind that interest (swap) is due to hold positions overnight. The leveraged amount always corresponds to a loan. For the details, read the corresponding chapter on leverage products in the day trading for beginners book.

So if you are pursuing a longer-term strategy, you should reduce the leverage accordingly or even forego leverage altogether.

I usually recommend beginners to choose a well-known financial product, i.e. either a well-known index such as the DAX or, if you have special prior knowledge in certain areas, stocks or derivatives on stocks can also be of interest. Otherwise, the forex market is always interesting for beginners, for example the EUR / USD currency pair.

Learn swing trading

The basics of swing trading are no different from day trading. The same financial products are traded on the same exchanges and the chart analysis is similar too.

So I advise you to simply start with the article Become a day trader and start with a book such as day trading for beginners. There all the basics that are important are simply explained, or alternatively you can also watch the day trading video course, which is not so detailed in the theoretical basics but focuses on practice.

You can also just start with our free webinar to get a first impression of whether trading is for you at all.

Once you master the basics, you can move on to the more specific topics. An important factor that can be neglected in day trading, but plays a large role in swing trading, are news and cycles.

The specifics of a swing trading strategy

The principle is always the same when trading regardless of the strategy. Look for a good starting point and sell in good time.
When it comes to swing trading, however, there are a few special features to consider.

Cycles in swing trading

Cycles are regularly occurring phases in the market or regular events that influence the behavior of the price, such as elections.

Let us first consider a slightly longer cycle as an example. The so-called “economic crises”. I put that in quotation marks because I see it more as normal corrections in the market and the development after that has always shown that it was only half as critical as predicted.

In 1987 there was Black Monday on the stock exchange, in 2000 the dot-com bubble and in 2008 the real estate bubble and soon the next credit bubble, possibly at some point. In between there were a few “minor” crises in Japan or Mexico, but that's not important to us at first.

A very simple swing trading strategy now would be to wait for a crisis, then shop diligently when prices are down and wait for everything to recover. Ideally, sell before the next crisis. So you only act once every few years and have peace of mind and high profits the rest of the time.

Now this is a very simple example, but the same principle applies to all swing trades on all time units.

The price trend of stocks or other financial products is subject to cyclical fluctuations and thus runs up and down again and again.

Other cycles are e.g. the election of the US president or German elections, which take place every 4 years. There is also the 8 year cycle of gold, which roughly corresponds to the cycle of the last major market corrections. This is a relatively straightforward connection: when stocks are in crisis, investors prefer to invest in commodities that are considered crisis-proof.

But even within a year there are such cycles as the old stock market adage “Sell in May and go away” shows, which is even considered a capital market anomaly (details on the Sell-in-May effect) ( wiki / Sell-in-May).

Such cyclical fluctuations exist on all possible time units, whereby we usually look at the daily chart or higher for swing trading.

Such large movements are relatively easy to spot and act on. It becomes more difficult with smaller fluctuations and cycles based on the daily chart. Chart analysis and corresponding indicators are usually used for this purpose.

Chart analysis and indicators for swing trading

The basics of chart analysis are already explained in detail in the book and course. There are no other special features in swing trading. All trend-following indicators can point to good entry points, but also resistance and support lines or Fibonacci retracements.

But you can also do successful swing trading without indicators. If you have dealt with the basics of the trend following strategy a little, that should be enough for initial experience.

News in swing trading

Another important aspect of swing trading that is usually negligible in day trading is the news. The longer the holding periods, the more important news or major events such as the aforementioned elections become.

A good tip is to find out about the most important market-relevant news on a regular basis and to keep an eye on an economic calendar and financial news.

Depending on the market or product being traded, other financial news may be important to you. For stocks, for example, it can be quarterly figures, for indices it can be news such as labor market statistics, and for currencies it can be decisions by local central banks such as the ECB for the euro area.

In order to interpret such messages correctly, however, a basic understanding of the financial market and the corresponding economic relationships is also important. For example, if the ECB raises interest rates, the value of the euro would usually rise. When share prices fall, the prices of commodities such as gold usually rise.

Some of these relationships are easier to recognize and others are practically invisible to the outside world, because internal decisions by large players such as funds in the financial market can also trigger such fluctuations without any externally apparent reason.

Here, as everywhere in trading, we can never know what actually triggered a movement in the price in the end.

If there are major events, I usually recommend simply closing the open positions or, if there is enough capital, expanding the stop limits if necessary. Otherwise, long-term positions may be closed unnecessarily due to short-term fluctuations.

The following pages are recommended:

  • A simple economic calendar, especially for forex trading, can be found here (is also available as a linked app)
  • You can find relevant financial news here:
  • Should you concentrate on specific countries / economic sectors, all news in the area are also relevant.
    For example, I am interested in the technology sector and do a lot in that area. So I take a look at the Gartner Trends Report, for example, and invest in appropriate companies. For example, with the rise of the smartphone trend, I invested early in corresponding technology companies such as ARM (more than 1,300% profit in recent years) and when the trend flattens or new technological achievements, I sell the corresponding positions again
  • Political news can also be exciting, such as the promotion of electromobility, which has made companies like Tesla one of the most valuable automakers in the world

Course gaps and overnight positions

The topic of price gaps and overnight positions is important for swing trading with leveraged financial products such as CFDs or futures. The detailed theory has already been explained in the book / course.

To repeat shortly:

If, for example, a share is at 100 euros at the end of trading, and a relevant message appears outside of trading hours, it can happen that the price at the opening has a so-called gap, because the share opens at 80 euros, for example.
That can be positive and negative and there are also special strategies that only deal with these loopholes. It is only important to be familiar with this phenomenon, to know the risks and to choose a broker without an additional payment obligation for leveraged positions.

Another special feature of the leveraged positions are the overnight fees. The leveraged amount always corresponds to a loan and if positions are held overnight, interest is due. Day traders who only trade within one day avoid this, but have slightly higher trading fees. The fees are based on the EONIA key rate of the ECB and are currently very low.

The entrances and exits in swing trading

This is the exciting point. When should a position be opened or closed?
First of all, about the exit: I do not recommend closing the positions by hand with the exception that big news is imminent and therefore too high fluctuations are to be expected. Otherwise, it is sufficient to have always placed a stop-loss order and to adjust it regularly to the course of the market.

Getting started is a little more complicated. I recommend you start with the free webinar and use the trend confirmation point, which is explained there, as an introduction. Alternatively, you can watch the video on the support and resistance levels on YouTube and use them as a guide.
There are countless other options, but I recommend that you, as a beginner, orient yourself to these two easy-to-recognize trading scenarios.

Later you can add various indicators and chart patterns if necessary. But a simple trading wisdom is:

Keep your trading as simple as possible.

Tips for implementing a swing trading strategy

Finally, a few hints and tips from practice on how you can trade successfully with swing trading.

  • First choose a base time unit in which you want to trade. I recommend H1 or larger. Depending on this basic time unit, you make all further decisions such as holding times of the positions, frequency of position control, etc.
  • Set the stop losses depending on your chosen base time unit. If you are trading the D1 chart, then set the stop loss accordingly on the last local minimum / maximum in the daily chart.
  • Don't check the positions too often! This is easy on your nerves and prevents wrong decisions. If you are trading the daily chart, it is sufficient to check your open positions once a day or just every 2-3 days, as long as there are no special events.
  • The news is important for swing trading. So you should check the economic calendar regularly, preferably daily, to see whether there are any market-relevant events.
  • I recommend beginners to close before big events like elections or ECB decisions. There often unnecessarily large fluctuations occur without real movement. As a result, stops may be triggered without there really being a change in trend direction, for example.
  • The longer the planned holding time, the lower you should choose the leverage or buy the base product such as a share directly
  • Make sure you have the right risk management, the stop setting and that you have enough start-up capital to sit out losses

Conclusion on swing trading

Swing trading is a good trading strategy for beginners and advanced traders. It is a little easier to implement than classic day trading and takes much less time. Therefore, it is also easy to implement for working people on the side.

Swing trading can also be implemented in parallel to short-term strategies and, in my opinion, is a good strategy for beginners and advanced traders.

The trend following strategy presented in the webinar is also well suited for swing trading and should help to find the right entry and exit points.