What is Swing Trading and Intra-Day Trading?

10 Jun
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It is absolutely essential to understand the difference between Swing and Intra-Day trading as a clear understanding of these concepts goes a long way in helping you decide your own Trading Strategy which suits your temperament and style. Here we go…..

Swing Trading

A style of trading that attempts to capture gains in a stock within one to four days. To find situations in which a stock has this extraordinary potential to move in such a short time frame, the trader must act quickly. This is mainly used by at-home and day traders. Large institutions trade in sizes too big to move in and out of stocks quickly. The individual trader is able to exploit the short-term stock movements without the competition of major traders. Swing traders use technical analysis to look for stocks with short-term price momentum. These traders aren’t interested in the fundamental or intrinsic value of stocks but rather in their price trends and patterns.

Intra-Day Trading

Intraday trading refers to opening and closing a position in a security in the same trading day. This can be buying and selling to capitalize on a potential rise in a security’s value or shorting and covering the short to capitalize on a potential drop in value. Intraday traders capitalize on small moves in the value of a security by using “leverage” or “margin”, which basically means borrowing money. Most day trading accounts are allowed to take an initial position in a security that is 4X the value of their account (per securities regulations), but some professional accounts get more leverage (i.e. 10X). For instance, a day trader with Rs. 10,000 in his/her account can take a Rs. 40,000 position in a security for day trading purposes. This amount is not allowed to be held overnight (only about 2X the value of the account can be held overnight per securities regs). The leverage inherent in day trading allows small gains in a position to yield meaningful profits (and losses). Most day traders are very strict about cutting losses with “stop loss” orders. This limits the potential downside (but not the upside) on any particular trade, hence the adage “cut your losses short and let your profits run”. With this basic strategy, a day trader can be wrong on 50% of his/her trades and still make good money. Day trading styles vary from “scalpers”, which take positions for only a few minutes, to holding a position for most of the day. Some day traders are momentum followers and jump onto any given move, while others try to identify intraday reversals. Virtually all day traders use technical analysis (stock charting) heavily in their decision making.



Leave a Reply

  1. Mr. Agrawal

    June 10, 2010 at 6:27 am

    Nice Post… By reading I can get fair idea of intraday and swing trading… Keep Posting..

  2. Twain

    June 15, 2010 at 3:53 am

    Как хорошо было Адаму: когда он произносил что-нибудь умное, он был уверен, что до него никто этого не говорил.
    What a good thing Adam had. When he said a good thing, he knew nobody had said it before. (С) Twain
    Надеюсь, Вы поняли к чему я об этом……