What Is Day Trading & Swing Trading For Beginner's Explanation?


Before you get started with your day trading adventure, it is important to know a little bit about the basics of day trading. Some people hear about this investment opportunity and how much money it can make them, so they jump in without doing any research. But this can be a dangerous way to do your work. It does not allow you to fully understand how day trading works and can even make it difficult to not lose money. Here we will look at some of the best strategies and tools that you can use to make you an expert when it comes to getting started with day trading. 

Swing trading vs. day trading


What do you need to look for if you are a day trader? The answer is actually pretty simple in the beginning, but there are a lot of different parts that come with it. First, you want to take a look for stocks that have some movement, and you want this movement to be predictable. Second, you want to work with stocks that you can buy and sell on the same day. With day trading, you will never keep your position overnight and then sell the next day. If you do not make the trades on the same day, such as holding onto the stock overnight, you have switched from day trading to swing trading. 

With swing trading, you are working with a type of trading where you will hold the stocks for a period of time. It is usually pretty short, and the trading will last from a day to a few weeks. The trading methods and strategies will be different for swing trading and day trading, so you should not use the same ones. They may seem similar because you are trading quickly in the market, but there are some key differences. Just remember, with day trading, you will purchase the stock and then sell it all on the same day. 

This quick trading can be difficult for some people to deal with. If you are not careful with your selections, you may end up selling your stocks at the end of the day for a loss. But you really do need to let the stocks go, even at a small loss. If you hold onto the stocks overnight, the strategies for day trading may lead you to an even bigger loss the next day. If you want to be able to hold onto the stock for a few days and see if you can get a bigger profit rather than a loss, then you will want to go with swing trading instead. 

Before you get started with your day trading adventure, it is important to know a little bit about the basics of day trading. Some people hear about this investment opportunity and how much money it can make them, so they jump in without doing any research. But this can be a dangerous way to do your work. It does not allow you to fully understand how day trading works and can even make it difficult to not lose money. Here we will look at some of the best strategies and tools that you can use to make you an expert when it comes to getting started with day trading. Swing trading vs. day trading What do you need to look for if you are a day trader? The answer is actually pretty simple in the beginning, but there are a lot of different parts that come with it. First, you want to take a look for stocks that have some movement, and you want this movement to be predictable. Second, you want to work with stocks that you can buy and sell on the same day. With day trading, you will never keep your position overnight and then sell the next day. If you do not make the trades on the same day, such as holding onto the stock overnight, you have switched from day trading to swing trading. With swing trading, you are working with a type of trading where you will hold the stocks for a period of time. It is usually pretty short, and the trading will last from a day to a few weeks. The trading methods and strategies will be different for swing trading and day trading, so you should not use the same ones. They may seem similar because you are trading quickly in the market, but there are some key differences. Just remember, with day trading, you will purchase the stock and then sell it all on the same day. This quick trading can be difficult for some people to deal with. If you are not careful with your selections, you may end up selling your stocks at the end of the day for a loss. But you really do need to let the stocks go, even at a small loss. If you hold onto the stocks overnight, the strategies for day trading may lead you to an even bigger loss the next day. If you want to be able to hold onto the stock for a few days and see if you can get a bigger profit rather than a loss, then you will want to go with swing trading instead. Buying long and selling short Day traders will always purchase a stock while hoping that the price will get higher. This strategy is known as buying long. Buying long will be a good option to go with any time you are looking at a stock, and you purchase it expecting that the price is going up. That first part is pretty easy to understand, but what will happen if the prices of a stock start to drop? In this scenario, you can sell short, and you will end up making a profit in the process. It is possible to borrow shares from one of your brokers and then sell them, all while hoping that the price will get lower and that you will be able to purchase those shares at a lower price and make a profit. This is called selling short. Let’s look at an example of how this works. Let’s say you borrow 100 shares of a stock from your broker and then you sell them at $100 a share. Then the price of that stock ends up dropping to $90. Now that the price has lowered, you will buy those shares back at the lower price and then give them back to the broker. You were then able to make $10 on each share, or $1000 total in this case. Of course, the market can also go up and then you will end up owing that money to your broker, so you really have to understand the market before you chose to go with this option. This is why short selling can be a dangerous option to go with for beginners. It is hard to know when a share will go down and you could easily end up owing more money than you would make. Many beginners avoid this option, at least when they are first starting, to help them not get caught up and make the wrong decisions. Institutional vs. retail traders Individual traders are often known as retail traders. These people may work on trading either part-time or full-time, but they work for themselves and are not managing the money of other people. In reality, these retail traders are not a big part of the market because most people will trust a brokerage firm to help with their investments. Then there are also the institutional traders which would include the big investment banks, trading firms, hedge funds, and mutual funds. These people are more professional with their trading and may use high-frequency trading or computer algorithms to help them get their results. These traders will often have a lot of money behind them, and they can add more aggressiveness to their trading than the retail traders. As a retail trader, you may be curious as to how you will be able to compete against the institutional traders who have more money and more technology available to use. The biggest benefit of being a retail trader is that you can make choices about whether to stay out of the market or if you can trade at any given time. On the other hand, institutional traders will need to trade no matter what. As long as the retail trader does not get caught up with overtrading, they can use this to their advantage and make a great profit in the process. Only trading the best It is important that you learn what stocks are the best when you are a day trader. You only get one day to make a purchase of the stock and then sell it. You do not want to end up with a stock that quickly goes down and costs you a lot of money in the process. This is why it is so important to come up with a strategy that will help you out. We will talk about a variety of strategies and methods that you can use to help you be more successful with your day trading. The most important thing that you can do here though is to learn which stocks are the best. You need to be able to look at a stock and see whether it will continue to go up or not. Is this a good stock that has something unique about it, something that will keep it going up even if the market is going down a bit? Or is this a stock that is only going up because the whole market is seeing an upturn. This can make a big difference in which stocks you pick, and we will take some time to look at these and figure out which stocks work the best with the different strategies you will want to choose. Advantages and Disadvantages of Day Trading Pros Making huge profit With day trading, you can make a substantial profit. But of course, you can only achieve this if you have the traits of you true day trader – diligent, decisive, and responsible. Boss spells Y-O-U You are your own boss. As a day trader, you work independently. You can work at your most convenient time, take day offs if you want to, and work at your own pace. Never gets boring As a day trader, you need to work your wit every day against the market and other professionals – be it daytime or nighttime. Unlike the boring, trivial tasks in office or dull cold-calling, you, as a day trader, always feel the adrenaline rush every rapid-fire trading. Not because you want to, but because you need to. Especially if day trading is your primary source of income. Yes, in day trading, there will never be a dull moment. Cons You are your own boss Being your own boss can be a very fun thing. But it’s not always like that. Being your own boss (and focusing on day trading) means you need to quit your day job. That means giving up a stable, monthly paycheck. As a full-time day trader, you need to push yourself to work hard to earn enough profit to pay your bills and to enjoy a lifestyle you want. Burn, baby, burn! We’re talking about getting burnt out in here. Day trading is not always rainbows and butterflies. There may be times when it feels like day trading is the worst storm in your life ever. Day trading can become very stressful because you need to monitor multiple screens to detect opportunities for trading. And when you find one, you need to act very quickly to exploit them. This is your everyday life as a day trader. Overworking yourself is mandatory in this kind of job.


Buying long and selling short


Day traders will always purchase a stock while hoping that the price will get higher. This strategy is known as buying long. Buying long will be a good option to go with any time you are looking at a stock, and you purchase it expecting that the price is going up. 

That first part is pretty easy to understand, but what will happen if the prices of a stock start to drop? In this scenario, you can sell short, and you will end up making a profit in the process. It is possible to borrow shares from one of your brokers and then sell them, all while hoping that the price will get lower and that you will be able to purchase those shares at a lower price and make a profit. This is called selling short. Let’s look at an example of how this works. Let’s say you borrow 100 shares of a stock from your broker and then you sell them at $100 a share. Then the price of that stock ends up dropping to $90. Now that the price has lowered, you will buy those shares back at the lower price and then give them back to the broker. You were then able to make $10 on each share, or $1000 total in this case. Of course, the market can also go up and then you will end up owing that money to your broker, so you really have to understand the market before you chose to go with this option. 

This is why short selling can be a dangerous option to go with for beginners. It is hard to know when a share will go down and you could easily end up owing more money than you would make. Many beginners avoid this option, at least when they are first starting, to help them not get caught up and make the wrong decisions. 

Institutional vs. retail traders


Individual traders are often known as retail traders. These people may work on trading either part-time or full-time, but they work for themselves and are not managing the money of other people. In reality, these retail traders are not a big part of the market because most people will trust a brokerage firm to help with their investments. 

Then there are also the institutional traders which would include the big investment banks, trading firms, hedge funds, and mutual funds. These people are more professional with their trading and may use high-frequency trading or computer algorithms to help them get their results. These traders will often have a lot of money behind them, and they can add more aggressiveness to their trading than the retail traders. 

As a retail trader, you may be curious as to how you will be able to compete against the institutional traders who have more money and more technology available to use. The biggest benefit of being a retail trader is that you can make choices about whether to stay out of the market or if you can trade at any given time. On the other hand, institutional traders will need to trade no matter what. As long as the retail trader does not get caught up with overtrading, they can use this to their advantage and make a great profit in the process. 

Only trading the best


It is important that you learn what stocks are the best when you are a day trader. You only get one day to make a purchase of the stock and then sell it. You do not want to end up with a stock that quickly goes down and costs you a lot of money in the process. 

This is why it is so important to come up with a strategy that will help you out. We will talk about a variety of strategies and methods that you can use to help you be more successful with your day trading. 

The most important thing that you can do here though is to learn which stocks are the best. You need to be able to look at a stock and see whether it will continue to go up or not. Is this a good stock that has something unique about it, something that will keep it going up even if the market is going down a bit? Or is this a stock that is only going up because the whole market is seeing an upturn. This can make a big difference in which stocks you pick, and we will take some time to look at these and figure out which stocks work the best with the different strategies you will want to choose. 

Advantages and Disadvantages of Day Trading

Pros

Making huge profit

With day trading, you can make a substantial profit. But of course, you can only achieve this if you have the traits of you true day trader – diligent, decisive, and responsible. 

Boss spells Y-O-U

You are your own boss. As a day trader, you work independently. You can work at your most convenient time, take day offs if you want to, and work at your own pace. 

Never gets boring

As a day trader, you need to work your wit every day against the market and other professionals – be it daytime or nighttime. Unlike the boring, trivial tasks in office or dull cold-calling, you, as a day trader, always feel the adrenaline rush every rapid-fire trading. Not because you want to, but because you need to. Especially if day trading is your primary source of income. Yes, in day trading, there will never be a dull moment. 

Cons

You are your own boss

Being your own boss can be a very fun thing. But it’s not always like that. Being your own boss (and focusing on day trading) means you need to quit your day job. That means giving up a stable, monthly paycheck. As a full-time day trader, you need to push yourself to work hard to earn enough profit to pay your bills and to enjoy a lifestyle you want. 

Burn, baby, burn!

We’re talking about getting burnt out in here. Day trading is not always rainbows and butterflies. There may be times when it feels like day trading is the worst storm in your life ever. Day trading can become very stressful because you need to monitor multiple screens to detect opportunities for trading. And when you find one, you need to act very quickly to exploit them. This is your everyday life as a day trader. Overworking yourself is mandatory in this kind of job.
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