Swing Trading vs. Day Trading in Forex – Which One Works Best?

In this article, you will learn about the different currency pairs, what day and swing trading are, the differences between the two, and the pros and cons of each of these strategies.

80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. *CFD trading via Plus500’s demo account.

What Is Forex Trading?

Forex trading is the name given to the trading of currencies. This is typically done in pairs, with major, minor, and exotic pairs available for trade.

Major Pairs

There are seven major pairs of currencies. These tend to be the most traded currencies on the market, with USD/EUR, USD/JPY, and USD/CHF often considered to be the best and most commonly traded options.

Minor Pairs

These are currency pairs that don’t include the US dollar, but will typically be a pairing of other major currencies. Commonly traded minor pairs include GBP/JPY and EUR/JPY.

Exotic Pairs

This is the name given to trading pairs of currencies where one is a ‘major’ and the other is the currency from a developing country.

These pairs are not typically traded by beginners, as they are subject to more volatility in the markets and can carry more risks. Some common exotic pairs include USD/MXN and GBP/ZAR.

Plus500 offers forex traders a range of tools to help them develop strategies and perform trades.

This includes CFD trading and access to real-time information through charts and analysis tools, as well as risk management options.

What Is Day Trading in Forex?

As the name suggests, day trading is a strategy that involves opening and closing trades within the course of a single trading day.

Traders focus on short-term price moves, using a combination of technical analysis and awareness of real-time changes to guide their decision-making processes.

Day trading is popular with traders who are able to devote a lot of time to the markets.

In most cases, these will be full-time traders. This is because effective day trading requires continuous analysis of market changes through the use of price feeds, alerts, and charts.

Plus500 offers users a comprehensive range of tools for day trading, including real-time alerts and continuous updates, as well as automated stop-loss and take-profit functions.

Additionally, demo accounts are available to help traders practice and fine-tune their day trading strategies.

80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. *CFD trading via Plus500’s demo account.

What Is Swing Trading in Forex?

Unlike day trading, swing trading requires traders to analyze information over a period of time and exercise restraint in their trades.

Typically, data will be analyzed to identify patterns in the rise and fall of currency pairs, with traders entering a trade towards the lowest point before completing near the top of the trend.

As there is a lower frequency of trading occurring, this can mean that there’s the potential for larger targets and bigger profit margins. Alternatively, swing trading can be used to provide regular, smaller profits.

Effective swing trading employs a combination of technical and fundamental analysis. Trades will usually be held open for days or weeks at a time, which makes swing trading ideal for those who can’t devote a lot of time to trades, as there’s no need to continuously monitor the markets.

Plus500 offers traders a range of tools to help with swing trading strategies, including real-time alerts, trend indicators, and access to an economic calendar.

Key Differences Between Swing Trading and Day Trading

While both strategies aim to profit from changes within the foreign exchange markets, there are several differences that can influence whether or not day or swing trading might be the better option for you as a trader.

Time Commitment

Day trading typically requires a larger time commitment when compared to swing trading. This is because effective day trading requires continuous monitoring of changes within currency markets.

Trade Duration

Swing trading involves leaving trades open for days or weeks at a time. In comparison, day trading involves quick trades made to capitalize on market fluctuations as they happen in real-time.

Capital Requirements

Day trading is often the better option for individuals with a smaller amount of initial capital to invest. Because of the longer-term nature of swing trading, it’s not unusual for traders to require a larger initial investment to keep their positions open.

Trading Frequency

Swing trading leaves trades open for days or weeks at a time, meaning that there is a smaller number of trades completed over a period of time. In comparison, day trading usually involves making a larger number of trades each day.

Stress Levels

Because of the fast-paced nature of day trading, there is also the potential for additional financial risk.

This can sometimes mean that there is an increase in stress and anxiety levels when trading. Traders should consider their individual risk tolerance levels before choosing the forex trading strategies that work for them.

Plus500 offers users a range of tools to help with both day and swing trading on forex markets. From real-time alerts and charts to mobile trading options and flexible order types, traders have everything they need, no matter which strategies they use.

Pros and Cons of Each Strategy

The strategies you choose will largely depend on your individual tolerance for risk, the time you’re available to devote to monitoring the markets, and the amount of investment you’re comfortable making.

Whether you choose to use day trading or swing trading strategies, each option comes with its own advantages and disadvantages.

Day Trading

Swing Trading

Which Trading Style Is Right for You?

The trading strategies you choose to employ for your forex trades will vary depending on your lifestyle, goals, life experience, and personality.

There are several things to consider when thinking about day and swing trading.

Time

How much time can you really devote to trading? If you’re only likely to be available during evenings and weekends, swing trading is likely to be the most suitable option for you.

However, if you want to trade full-time, day trading can be a viable option.

Decision-Making

Swing trading is a good option for those who prefer a slower, more planned-out approach to forex trading, while day trading is popular with individuals who thrive on making fast decisions.

Pace

Day trading is a fast-paced process that requires traders to stay calm under pressure and make decisions with a level head. If you prefer a slower strategic approach and are more patient, you might be better with swing trading.

How Plus500 Can Help You Find an Approach

Making use of Plus500’s demo account functions will allow you to fine-tune your approach. Taking the time to practice both day trading and swing trading strategies will mean that you’re familiar with the functions of both.

Demo accounts can also provide additional insight into which forex trading strategies might best suit your needs and personality.

80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. *CFD trading via Plus500’s demo account.

Frequently Asked Questions

Final Thoughts

Swing and day trading both have advantages and disadvantages, and while neither is specifically better than the other, it’s likely that one will be better suited to your individual circumstances. It’s important to consider the benefits and risks of each one before choosing the strategies you want to use.

By taking advantage of Plus500 demo accounts, you can practice a range of strategy options using real-world scenarios without risking real money. You can also familiarize yourself with the extensive range of educational resources, analytics tools, and risk management options.

Once you’ve fine-tuned your strategy, you can then translate everything you’ve learned onto active markets.

WikiJob does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.

80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. *CFD trading via Plus500’s demo account.