In Day Trading, positions are most often entered and exited on the same day. This is considered extremely risky. The general rule is that the shorter a time period a trader is using, the riskier the trading. With this type of short term trading, trades happen more often and more quickly which is likely to lead to more mistakes, which will increase the risk. Because of the quick nature of Day trading, the rules are stricter and it is more important to stick to them in order to limit your losses. Day traders move quickly, and trade frequently.
A Day Trader is extremely dependent on volatility. He would only want to trade in the most volatile markets because they will see movement on a day to day basis, where less volatile markets don’t usually move far in a one day period. Day traders also are tied to the international clock. They need to be aware of exactly the right time to trade the currency pairs they are dealing with and know what time it is in the country whose currency they are trading.
The other extremely important factor in Day Trading is liquidity. If there is limited liquidity, the trades will not open and close as quickly as a day trader requires them to.
Some of the advantages to Day Trading are that even though it is risky, because these trades tend to be smaller the overall amount you can lose at one time is less than longer term trading. Trading faster means you can make money faster. If you have trade after trade that is successful in this type of trading, you can make a big difference in your bank accounts in a short period of time.
Negatives of Day trading include its similarity to gambling. The flip side of making money faster is that you can also lose money faster than in longer term trading. Day trading is very time consuming because you are watching the markets for the whole time they are open ready to make your move. It is highly recommended that novice traders do not get involved with day trading for these reasons and many others.
Swing trading is short to medium length trading. Longer term than Day trading but not considered long term, Swing Trading has many benefits. These trades typically last anywhere from 1-30 days and require fewer strict rules than Day Trading but it is still recommended to stick to your strategy carefully.
The take profit and stop losses in Swing trading are more manageable. This type of trading is much less time consuming. It is much easier to learn to do Swing Trading than Day Trading making it much more attractive to those who are newer to the Forex Market. There is much less stress involved in Swing Trading than in Day Trading.
Discipline and sticking to your plan and strategy is extremely important in Swing Trading. While it requires less time that Day Trading, Swing trading also is time consuming and you must watch the markets carefully in order to be successful.