To swing or day trade...that's a question traders battle with on a day to day basis. Many end up trying to do a little bit of both with no real success.
I am going to tell you why I ended up taking a swing trading approach myself, but I also want to challenge myself by raising the pro's and con's of each.
Before I go into that I want to explain why I went from day trading EUR futures to swing trading CFD's. Some say this may have been a backward step.
Financially (at the time)...yes, but emotionally...hell no.
You see, coming up through the traditional retail forex trader route, going to seminars, attending webinars, joining a trading programme for thousands of pounds (ouch) I have tried it all.
I was first taught to swing trade the daily time frame by using the 20, 50, 100 exponential moving averages. At the end of every trading day which is 10pm GMT for me, I would scroll through the charts looking for the price to be in a trending market, and for a retest of the averages and a pin candle.
That was it.
And you know what, it works. In my first year EVER trading, I made a profit on the year of 33%.
I decided that this wasn't enough. Despite looking at a chart for about 15 minutes a day 33% wasn't good enough in my eyes.
Why? I realised if I wanted to own a lambo like I'd been told I could do, I'd have needed an account size of at least £1,000,000.
Where the hell was I going to get that as a young 20 year old kid!
So, I ended up trying the lower time frames, swing trading but using hourly charts. This also turned out pretty good for me, in a year I morphed my 33% from the year prior to...(drum roll please) 54%!
Good going If I was to look at that today. That's over 4% a month!
But again, I thought this wasn't good enough.
Especially as I started to see the day trader lifestyle across social media, the money, cars, and exotic places. I wanted that.
This attitude to the markets led me on a path of losses and borderline depression. I began trading the 1 minute time frame trying to time the market to perfection.
I would do all the wrong things, try and guess the market, overleverage, revenge trade and many more things.
My expectations were so high, I didn't think how this was impacting me from a mental point of view. And if there is one thing I have learned over the years, this game is a mental one.
Despite this, I thought I would give it one more crack and ended up heading towards the futures market. I wanted to see raw data. I wanted to know if there was more behind an engulfing candle, a pin candle or whatever candle!
And granted, I found it. I used a combination of market profile, volume profile, cumulative delta and footprint charts to trade the markets. I did this successfully for a short period of time.
Here's one of my trades:
The problem I had was...time. I had to be on the screen at the London open every day, if I missed it, I could miss a trade. At the start this was ok, I managed to balance my job whilst day trading.
However, once I got profitable trading the London open I thought...I'll trade the US one too. Being in the UK has its advantages, one being we can trade the two most volatile sessions in a day.
I began to become stressed. My work was becoming a rush to get everything done for the day, so I was in essence trading all day and working in the evenings.
Not only this but I noticed I messing with my trades. I'd take a trade with a good set up but cut it early because of fear of losing my gains. And this kept happening.
I couldn't keep it up. I was burnt out.
I decided for my own peace of mind to revert back to basics and trade the higher timeframe.
Focus on fundamentals which I love, indicators I use and swing trading opportunities.
What I found was peace and more importantly consistency. I wasn't flip flopping anymore, I wasn't constantly glued to the screen, I could go out and enjoy life a little more.
That being said here are the pros and cons to day trading and swing trading that I have found:
Pros of day trading:
You know if you're right or wrong pretty quickly.
You don't have to hold trades overnight or over weekends. Less gapping issues.
No overnight charges.
Trade at a set time every day.
Nowadays brokers have no spread accounts.
Cons of day trading:
Can kick you in the… mentally if you begin to chase profits and trades.
Losses can be greater, more trades doesn't equal more profits.
Low spreads or no spreads often mean commissions will be high and if you trade a lot that can add up.
Lots of lower time frame noise with regards to price action.
Pros of swing trading:
Less time on the chart. Can look for set ups, place alerts and walk away.
Can hold trades and trends for longer, which can be beneficial when you catch one.
Fewer trades, good for comms as well as peace of mind.
You can use a fundamental and technical approach.
Not very stressful.
More information, as price develops you have time to make a decision.
Cons of swing trading:
Patience. You have to wait to win or lose, and waiting 5 days for you to lose a trade can suck.
Overnight and weekend risk, if the market gap against you, that is not a fun place to be.
When the market flips between fiscal and monetary policy attention FX markets can swing a fair bit.
For me, I don't think one type of trading is better or beats the other.
It all comes down to you as the individual and what makes you tick.
What is good for your psychology?
What allows you to perform well?
I am a naturally calm and patient person so swing trading suits me.
If there’s something I want you to take away from this, find out what suits you best, don’t force it.