Day Trading vs Swing Trading: Which Is Better for Beginners?

Day trading versus swing trading? What is actually the strategy that you should choose at the beginning? Today I'll show you in great detail what the differences actually are between swing trading and day trading. Because many people mix up these concepts. Secondly, I want to show you what advantages it brings when you know exactly and figure out which strategy you should use for yourself from the start. And thirdly, what actually suits you better as a side job so you can apply it effectively and hopefully profitably from the start? And which mathematical key figures should you definitely pay attention to so that you don't make any big mistakes? Because I've found out one thing in over 20 years of my own experience, where I also had to make a lot of mistakes at the beginning, that it comes down to one specific thing And I'll explain that to you in depth today. Yes, as a day trader, you naturally have completely different prep work to do than as a swing trader. What do I mean by that specifically? Look, in day trading, it's like this: especially if you want to trade high-potential strategies, you have to know exactly where do I get in, where do I get out. Of course, you also have to plan that very cleverly in swing trading, but the big difference is that because you usually take much smaller distances in day trading, the probability is many times higher that your goals will be reached. Or you can also trail your stop losses well because you're in the market the whole time. In swing trading, on the other hand, it's like this: you enter a position, for example, at the end of the day or on the trading day when the market opens, and then you're often not at your desk at all. That means it also happens again and again that the market doesn't reach its goal, even though it was already very far in profit. That's how it is in swing trading, and that's okay. Because I'm going to present something to you now, it's very important to me, where I'll give you a quick perspective. What does the difference look like in terms of framing? And secondly, what is the math behind it? And that is just very, very exciting. Let's start with a day trading setup, like the one we like to use at Trade2Traders, for example. You can see here at the top, this is a 30-minute chart. You can get a nice overview of the price structure there. How has the market been running lately? And then I always like to look, where am I right now, yeah? Here I see immediately, yeah, I'm currently somehow right in the middle of the second downward wave. That's the first piece of information I get. Now I look at the weekly profile, so market profiling, and see, okay, this here was the previous week. Here, for example, was the value of the previous week, so the equilibrium. And where am I currently? I am currently right here. This means I'm currently in the previous week's balance. But I already have one more piece of information: the VPOC, that is. The Volume Weighted Point of Control, the Balance of Turnover is already below this price range. For me, this means that, yes, the market looks weakened for now. In terms of structure as well, I have a profile here that is more downward-oriented. So I know it's likely downward-oriented with a tendency towards sideways movement for now. Now, I'll go to the next level and see what does the whole thing look like intraday. Because I have to keep zooming in to look very precisely in day trading. And then I can already see, okay, this is currently the profile for today. Unfortunately, many people don't take that into account. And here I can see, yeah, we're also currently more in balance here, more in balance. For me, that means I'm in a state of balance. So, and now I can, for example, draw this balance into a corresponding small chart. I've chosen a 5-minute chart here, and therefore know which setups I can look for here at the top and bottom. And that again gives me a hint as to whether I'm trading trend continuation setups or looking for counter trades, that is, reversal trades. So I've checked that off here as well and say reversal short, reversal long. And now, in the final step, I can also combine all of this through the dynamics of a footprint chart and combine it with For example, an order book. This means I can see when the market comes up here, what does it look like in terms of turnover? Is there still liquidity up there or not? And what about the overall market speed? Once I have carefully checked that off my list, I can say with confidence that, of course, there is a much higher probability that I am actually right with my trade for the time being. It really gives me a lot more peace of mind to see all those factors aligning perfectly before I commit. What else do I get from this? Naturally, relatively small stop losses that I set based on the setups, and depending on the structure, also quite good risk-reward ratios. And that is precisely one way we choose in day trading. Let's choose the path of swing trading and look at the SpaceX stock here, for example. SpaceX is now well below the IPO price. This means SpaceX was on everyone's lips, and everyone said, wow, this is going to be the new super stock, and every Everything will be great. I know that many people bought SpaceX. In swing trading, however, we saw, okay, here the market, it showed us a strong sell-off, yeah, and it delivered a pullback. From here, it was clear that the probability of the market moving down was high for now, and we could assume as a profit target, yeah, this is definitely the end of the line for now. The probability that the market will return to the initial public offering price is high. What does the whole thing look like in terms of the risk-reward ratio? Entry, stop-loss, reward. And you can already see here, it's a very large risk-reward ratio, much larger than what you usually have in high-frequency day trading. That means the first thing we can determine for ourselves here is, the risk-reward ratio is many times larger than is usually the case in day trading. Unless you have a super, super day trading strategy, which unfortunately often doesn't work in the long run. So, the next thing that is absolutely crucial to understand is this: If you choose to follow this specific path, then the probability that the market, when it runs from down here all the way up to here, will eventually turn around again and suddenly stop you out, is actually many times greater than it would be if you were using a standard day trading structure. And that is precisely why we have to take a completely different, more robust mathematical approach here to ensure we are properly managing our risk. What do I mean by that? I mean the following: if you have a win rate of 38% in swing trading, for example, then you have a completely different position sizing strategy than if you were to do the whole thing with a win rate of, say, 61 or 63% in day trading. It really comes down to the fact that your approach to risk must shift significantly based on those specific numbers. Why? And that's something that unfortunately many people don't quite have on their radar. That's the biggest, biggest problem that many people have over and over again. You have much lower win rates in swing trading, but you have much larger risk-reward ratios, which really changes the entire dynamic of your approach. And so, you even have the mathematical possibility, and I'll show you exactly how this works in the next video, to see how you can still earn very, very good money with it, even if your win rate isn't as high as you might expect. It is a fascinating concept that we will dive into much deeper very soon. And I can tell you that's the absolute basics of the changes and differences between swing trading and day trading. In addition, and now we come to the topic of time expenditure. It's like this: Imagine you open this chart, and imagine you have an idea down here now. Maybe there's no more liquidity here. I'm looking for a long trade. Okay, now you're looking for a long trade down here. You have a small P here, an impulse, and you say that gives me the information now that the market can rise. Now I look up and say, okay, here, for example, is still a gap open, and I assume that this gap will be closed. That's an assumption that isn't stupid, although currently down here there's unfortunately very little liquidity, but we're making a theoretical assumption. Now I have a theoretical risk of this size, sorry, that the market just doesn't do what I want it to. I enter via this balance and say, this here is my opportunity. And so you can already see that the risk is many times greater compared to the opportunity. The opportunity is around, let's say, 119 to 130, so the opportunity is about $11. My risk, however, is, let's go 119 to say, if we put it under the POC, 114. So I have a risk of 5. That means I theoretically have $5 of risk, an $11 profit range. What does that mean in terms of the risk-reward ratio? I have to divide 11 by 5, and now I get my risk-reward ratio. That means for me, I have a risk-reward ratio of 2.2. So, but that also means I have to let the trade run until it reaches its profit. So now you could say, yes, a risk-reward ratio of 2.2. How does that help me? And I want to explain that to you very clearly before we get down to business later. And that's exactly what we're going to look at now, whether the risk-reward ratio, at what win rate does it even mean that I can theoretically make money with it? An incredible number of people really make this mistake. I have a very simple graphic here, and theoretically, without fees, you would already be slightly in the black with a win rate of 32%. That means if you're only right every 3rd time with your approach, you would theoretically already be making money. If you had a win rate in swing trading of, for example, 50% with an average risk-reward ratio of 2.2, then you already have 0.6R per trade. That is really, really strong. That means there are 2 things you can tweak to get better. Either you manage to successfully increase these stretches here, these specific winning stretches here, simply because you have fundamentally different assumptions about the market. It really comes down to those core assumptions. That's one. The second possibility is to work on your setup. So that your stop loss becomes smaller. What happens then? And that is really the huge difference here. You no longer have to worry about dealing with consistently low hit rates, because you will then also be able to earn a significant amount of money even in those instances where you are often not right. It completely changes the game. And in swing trading, you can then plan your entries with very simple concepts, and that is of course much easier than if you have to be high. Highly focused in high-frequency day trading, always at the market. For example, you can theoretically place your orders via end-of-day analyses when you see, yes, I have a clear idea, I have a clear indication that the market is now initiating a movement up or down, it doesn't matter, and above all, I have a very clearly defined target area. And if you do that, it's of course much, much easier than if you go very, very, very deep into trading. I will explain the mathematics to you in much more detail in another video, but it was important to me first to show the difference. That also means, of course, you have to see, if you only have a little time after work, for example, isn't this model in swing trading the approach that works much more efficiently for you? Even if you're not right as often and have lower hit rates, you need much less time and can therefore pick out many more good trades in the markets. You just have to filter them a bit. And then you can relatively easily, yeah, get into implementation with that. And that's what I wish for you, because that's a path that is simply very effective. I hope that helped you. It was presented very rudimentarily and very simply, but it should open your eyes a little bit. It's not always about having high hit rates and always being right, but it's about having mathematical advantages and having a clear concept that you can apply in swing trading. Or if you're the frequent day trader, you can of course also build a mixture of that. Have fun with it!