Intraday Trading versus Swing Trading – which is more profitable ?

Hey folks, welcome to CCB in today’s post I’ll be sharing my thoughts on benefits of intraday trading and swing trading and also compare them.

For those of you who do not know the difference between intraday and swing trading, here’s the answer. Intraday Trading is when one buys and sells stocks or vice versa within the time frame of a day. On the other hand Swing Trading is when people hold the stocks for few days before exiting the trade. There’s also BTST trading, it stands for ‘Buy Today Sell Tomorrow’.

Let me now compare the benefits of aforementioned types of trading. Imagine a stock went up by 1% per day, now this doesn’t mean that intraday trader made 1% of return on that day. The reason is, stocks tend to move up and down. For example, the stock could have gone to 0.75% in the upward direction and then fall by 0.50% and then again move upward and finally end at 1% higher than the previous day. Since stocks keep on oscillating, intraday traders tend to book their profits early. If they don’t book their profits early, there’s a chance that the stock may move in the other direction and the trader may end up in loss. So technically even though the stock closed 1% higher than the closing price of the stock on the previous day there’s a chance that the trader made less than that. On the other hand if the day trader placed multiple bets (in both direction) then there’s a chance that the day trader made more than 1% during the trading day. I’ll explain how to take multiple bets at the end of this post so read the post till the end.

Now moving to swing trading, the swing trader actually makes the entire 1% per day since she/he would be holding the stock. Also the swing trader mayn’t be in front of the trading screen the entire day.

Now comes, ‘What happens on the second day ?’ Imagine the stock price on the first day was ₹50 at opening and closed at ₹51. On the second day the day trader has to buy the stock at ₹51 provided the stock doesn’t go less than ₹51 and also moves in upper direction. Assume the day trader made a profit of ₹1 on the first day, now all that profit would be gone because she/he would be using that money to buy the stocks on the second day and in this case the number of shares too would be same, so technically there’s no compounding. And if the day trader buys the share at ₹51.25 and if she/he made less than ₹1 profit/share on the previous day, the number of shares she/he could buy would be less than the previous day and if the stock doesn’t move well in upper direction the profit made would be less than the previous day. On the other hand swing trader would be sitting on profit if the price is moving upward, since that swing trader got the stock at ₹50 on the previous day, her investment would be ₹50 and if the stock closes at ₹51.25 on the second day the total profit would be ₹1.25. Whereas, the day trader would have ₹0.25 since she got the stocks at ₹51 on the second day.

What happens when your budget is low ? Well in my case I end up spending the profit on various things like biryani, shopping etc. so I won’t be able to compound and the reason is my profit is small. On the other hand people who make 5 digit or 6 digit profit would still be able to compound provided they spend 3 digit on biriyani and 4 digit on shopping.

Also in the previous paragraph I did not mention about tax, brokerage etc. that intraday traders end up paying. Swing traders pay this only when they exit their position.

Well in the aforementioned paragraphs I was in favour of Swing Trading, in this paragraph I’ll talk about the benefits of day trading. If you are in India and trading in cash market or equity (not futures and options) then the expiry for short selling is one day. So swing traders cannot participate in short selling. However, they can short on their long position but this falls under the amalgam of intraday and swing trading. To know more on this check out my post ‘Day Trading for Beginners’.

Another problem of swing trading is overnight risk. If a bad news occurs late in the night then the market would fall the next day. On the other hand intraday traders can sleep peacefully (Intraday traders actually think about stocks even when they are asleep :p ). The next problem with swing trading is technical indicators may show a sell signal during the trading hours, so if you are someone with a regular job then you may not be able to do much about this and by the time you reach home and check your portfolio there’s a chance that your swing position may be down by a huge magnitude. This actually happened when the UK variant of the Corona Virus was found. The market nosedived in the last 30 minutes of the trading day and the media called this “3 P.M. Swing”. However, these days some platforms offer alerts when a stock reaches a particular price, so that may come in handy.

Earlier in the post I mentioned about taking multiple bets, so here it is. Stocks have support and resistance levels. Sometimes it hits both the levels and then reverses. So if the stock hits the basement and reverses then take a long position. If the stock hits the penthouse and reverses take a short position. If the stock is oscillating then take a position based on the favourable direction. For example, imagine a stock to be oscillating between ₹50.70 and ₹50.50 and the number of sellers is greater than the number of buyers by a huge magnitude. In such a case short at ₹50.70 and exit at ₹50.50. This can be done twice or thrice provided the conditions are favourable. So technically even though the oscillating range of the stock is 20 paise you would have made 40 or 60 paise. Note, this doesn’t happen everyday. Also breakout traders enter after consolidation. So if the stock breaks ₹50.70 breakout traders go long and if the stock breaks ₹50.50 breakout traders go short. So setting a stop loss is essential. Also you should be experienced in doing this. Talking about myself, I take very few trades per day and I short my long position. Also when you take too many trades you actually make your broker rich and if the trade doesn’t go right you end up becoming poor. So trade wisely.

Well, if you liked this post, do check out my other posts. If you feel this post would benefit someone then please share it. If you reached here via social media platforms then please drop a like. See you next time with a different one. Byeee 🙂

Disclaimer : Trading stocks is subjected to market risks. Please read all the terms and conditions before investing. The motive of this lesson was to teach little things about stocks for those who do not understand much about stocks. will not hold any responsibility for any losses incurred to the readers of this post.

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