If you want to be a successful trader, the first thing that you need to decide on is your trading timeframe. This is something you just can’t miss or disregard since your trading timeframe can really affect your success. In order for you to decide which timeframe to choose, you have to learn how each works first.
The Difference Between Day Trading and Swing Trading
With day trading, traders usually purchase and sell stocks between 9:30 AM to 3:50 AM EST. They make sure that they’re out of the market when the clock hits 3:50 AM.
Swing trading on the other hand lasts for 2-5 days. Traders wait for a good price movement before they get in and book a relatively substantial profit.
As you can see, the difference between 2 time frames is the length of the traders’ stay in the stock market.
The Risks Of Each TimeFrame
The Risks Of Each TimeFrame are always involved when you’re trading. With day trading, since traders exit the stock market by 3:50 PM of the same day they entered the market, they don’t have to worry about price fluctuations that can happen overnight. Traders can go home, recharge and get ready for another trading day the next day. With swing trading, you’ll be holding overnight positions, thus exposing your fund to overnight risks.
Swing traders expose their stocks to overnight risks. There are a lot of things that could happen while the market is closed. Examples of these are release of earnings, mergers, upgrades and so on and so forth. This is the reason why it’s really important to place your stop and take profit areas to protect your capital and unrealized gains.
Knowing and placing your stops and take profit areas can save you from losing money while deep in your sleep. Beginner traders are encouraged to start out as a swing trader because day trading is extremely-fast paced. It requires active management and unless you have the experience and skills, you may not be able to keep up.
How Much Time Do You Have?
Because of the nature of day trading, you are required to spend more time in the market and even after the market closes. Day traders are required to intensify their focus on market activities so as not to miss minor shifts in momentum and other elements that can affect their position. So many things happen in just a few minutes that they can’t miss. Once the market closes, traders also need to spend a little more time analyzing charts, doing post-trading evaluations and additional research for the next trading day.
With swing trading, you can spend less time managing your trades. You may spend a few…