Position Traders vs Swing Traders: Who Make It Big In The Stock Market?
In the world of investment, a variety of trading strategies have evolved, catering to different groups of trades. Today, for any asset segment, you will find four main types of trading strategies, namely day trading, scalp trading, swing trading, and positional trading. If you are planning to enter the market, then you need to pick up a style of trading that suits your trading personality. Normally, traders select one trading strategy and stick to it, but crossovers also happen, mostly in using technical indicators which are widely used and forms the base of technical trading.
If you are a novice investor, it can take you a fair amount of time to understand each trading type. To make it easier for you, in this article, we will discuss position trading vs swing trading, the two common forms of long-term trading.
Swing Trading
Swing trading is directional trading, where the trader tries to take advantage of short-term price movements.
In swing trading, traders get involved in deals that span over several days or weeks. Unlike day traders, they trade infrequently and don’t close their position at day end. They hold onto their position and wait for a larger profit to emerge. They take a bigger risk for bigger profit and therefore, sometimes swing traders trade also against the market trend. They use market indicators and technical analysis to predict changes. When an asset enters the overbought or oversold area, the swing trader takes the opportunity to plan a trade.
One difference between positional trading and swing trading, the latter has more trading opportunities than the former.
Positional Trading
The duration of positional trading is closer to long-term investment. Position traders enter into deals that can last for weeks and even months. However, in investment, the investor enters only a long position, but in positional trading, traders enter into both short and long positions. With this trading strategy, traders avoid the daily gyration that day traders undergo.
Positional traders use an array of fundamental and technical analysis, trading indicators, and patterns to eliminate daily noise.
On the fundamental level, positional traders rely on industry and company information to form a decision on their asset. They pick stocks that they believe will grow significantly over a period. They spend a lot of time in finding assets that worth their attention.
Making The Decision
In the discussion of position trading vs swing trading, often the question that arises next is which one is a better style of trading. Both trading styles focus on making a bigger profit by identifying assets with momentum and following a market trend to strike a deal when an opportunity arises. Traders adopt a style based on risk-taking ability, the time they want to invest, and also on market volatility. Before you initiate a trade, check the market condition for the asset.
Both styles suit investors with long-term plans. However, swing traders would trade more frequently than position traders. You can adopt a swing trading technique if you aim at generating cash-flow. Position trading, on the other hand, concentrates more on generating wealth over time.
Varying market conditions necessitate different trading strategies. In turbulent or bearish markets, adopting a short-term mindset through swing trading can be advantageous. Conversely, in a highly bullish market with rare pullbacks, position trading might be the more viable approach.
Swing Trading is a method of investing in the stock market. Traders who practice Swing Trading hold stocks for a few days to a few weeks, lying in wait for a substantial price hike before selling them. The better the trader's estimation of the perfect time to sell, the better are his profits.
A long position is the purchase of a security with the expectation of its value rising, while a short position is the sale of a security with the anticipation of its value decreasing. These positions can be utilized in various strategies to manage risk and generate profit in the dynamic world of finance.
Both day trading and swing trading are riskier, but the day trader has less time to make decisions and respond correctly. Also, a person will require more experience and knowledge to enter day trading. However, swing trading, on the other hand, is quite easy to manage. A person doesn't have to devote their full time.
Missing Long Term Opportunities: Swing trading, focused on short term price swings, may lead to missing out on lucrative long term investment opportunities. Exiting trades at the first signs of a drop or pullback can result in overlooking stocks with the potential for significant long term returns.
So, when entering a swing trade, you often must determine why you're buying or selling at a specific price, why a certain level of loss might signal an invalid trade, why price might reach a specific target, and why you think price might reach your target within a specific period of time.
Can you make a living swing trading, or is this just another case of “too good to be true”? This trading style is positioned between day trading and long-term investment and demands a strategic approach and a solid understanding of market trends. But, yes – you can absolutely get started swing trading for a living.
Swing trading involves taking trades that last a couple of days up to several months in order to profit from an anticipated price move. Swing trading exposes a trader to overnight and weekend risk, where the price could gap and open the following session at a substantially different price.
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If you are a positional trader, you will need to use multiple time frames to assist with your trading. 60 mins charts, Daily charts, and Weekly charts are the most frequently used positional trading time frame to take a positional trade. Spotting the trend of the stock on the weekly chart is necessary.
Pullback trading allows traders to profit on declines or delays in the upward trajectory of an asset's price. The goal is to purchase undervalued stocks and sell them after the asset has recovered from the setback and resumes its upward trajectory.
On average, day traders with $10,000 accounts can make $200-$600 per day, with skilled traders aiming for 2%-5% returns daily. So, it is possible to achieve a daily profit of $200 to $600 with a $10,000 account.
One of the most successful Indian swing traders, Rakesh Jhunjhunwala, often used technical analysis and trend identification to make informed trading decisions. Jhunjhunwala's approach emphasizes understanding market cycles and capitalizing on short-term price movements.
It allows beginners to learn at a comfortable pace, manage risk effectively, and fit trading into their daily routine. While no trading method is without risk, swing trading offers a balanced approach for those starting in stock trading.
There is a substitute for short term trading options in this investment. Position traders might move more quickly even though they often hold their positions for lengthy periods. As opposed to buy-and-hold investing, it enables investors to take both short and long term positions.
Of all the types of trading, position trading is the one with the longest holding times. Consequently, the profit potential is greater, but so is the risk.
Swing trading often results in short- to medium-hold periods. Profit per transaction is higher than day trading but lower than trend trading. Trend trading often results in the longest hold periods. Due to low transaction volume, profits can be highest per position.
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