Swing trading vs. day trading


There are a lot of rules and guidelines you have to learn in order to start implementing profitable swing trading. But once you've had a chance to digest these, you can start looking at different swing trading strategies. Once you master a strategy you will know how to make successful trades.


We're going to talk first about what swing trading is. A lot of people mix it up and confuse investing, swing trading and day trading. Wikipedia has a definition of swing trading:

“A speculative trading activity in any financial market whereby instruments such as currencies are bought and sold in an effort to profit from price changes or 'swings'.”


This is exactly what swing trading is. But that definition could also be for day trading. It's all about trading. It is not buying and holding on to a stock or other instrument passively for an indefinite period of time.


I call swing trading semi-active. The swing trader will have a general picture about where the stock is trading at any given time. He or she will also have a general idea about where it will go. Typically a swing trader will hold a position for a few days to a few weeks, or even a few months. I call it semi-active to distinguish between the very active day trader. In swing trading you can both go long and short. There is no need to stop trading during bear markets. Although, some people are reluctant to trade on the short side.


In day trading the trader will open and close any number of trades during one day. When the stock market closes he will be completely out of the market. The next day when the market opens, he will start trading again. A day trader enters very short term trades, from a few ticks, seconds, minutes or hours. But he will be completely out of the market as the trading day ends. Of course, there are day traders who hold positions overnight from time to time. Generally, this is avoided due to the overnight risk. The trader will generally prefer to open and close all trades during the day.


Identifying the best time to enter is the primary challenge in all trading strategies. Also, finding the optimal price level where to close out trades is equally important. Knowing where to place stop loss orders can also make or break your success in trading.


We focus on point and figure for swing trading. P&F is a great, simple trading system that continues to prove itself over and over again. By using P&F we can find unambiguous trade signals effortlessly. We can use it for both entering and exiting positions. And there are simple P&F methods to find the optimal price levels for placing stop loss orders, to minimize the risk. This method is available in a simple but powerful online P&F charting platform. In addition to P&F, this platform also gives you a ranking tool that finds the best stocks, as well as a market timing signal that tells you when the market is bullish and when the market is bearish. It also tells you how strong the bull or bear market is. This lets you be more or less aggressive in your trading. You can maximize your result, and minimize your risk, all using one simple P&F tool.