In this article we will demonstrate the advantage of swing trading over intraday trading . Both are different trading style and both have their own advantages and disadvantages. But if we generally check then swing trading have several merits over intraday trading.
Before going ahead , you must have basic knowledge about share market , You can read this article Stock Market basic for beginners .
what is swing trading
Now we come to the point , if you don’t have idea then your first question would be “what is swing trading” because it’s generally said, you should do swing trading in place of intraday trading.
In swing trading a trader makes his position (either buy the shares or sell its future contracts) in stock market and hold his position untill the share doesn’t hit the target or stop loss. In swing trading trader can hold his position for few days or few weeks, it depends on traders own decision. Whereas in intraday a trader book his profit or loss on same day.
In swing trading you select a stock based on proper technical analysis. If the stock will be in uptrend and you are clear with stock trend, then the possibility is, after one or two days correction again stock will start to move to its direction, you only need to hold your position with patience, and as the stock moves upside simply trail your stop loss.
So in swing trading you will be safe with short volatility. Whereas with intraday you have to close your position at the end of the day either with profit and loss.
But the big disadvantages with swing trading is uncertainty or news flow, you always have a risk of positive and negative news flow, like, election result, war, economic crisis, and lots of other sentiment that is the risk you always have with swing trading, so initiate your trade according to it.
Best moving average crossover for swing trading
Again some trader have questions in their min about which is the best moving average crossover for swing trading ? In swing trading we mostly use daily time frame and 200 days, 100 days 50 days and if you want then you can also also add 20 days exponential moving average.
If we talk about moving average crossover then you need to focus these combination if 20 days will crossover 50 days and 50 days will try or try to crossover 100 days and again if 100 days will try to cross over 200 days moving averages then you can consider the share or index is in uptrend.
Among all these 20 days would be very fast it’s possible 20 days would be already crossed 100 days and 50 days. But you can not take trade only on the basis of these things , you should also use some other indicator and price volume action before initiating your trade.
But off course moving average cross over is very important for swing trading, most of the trader use it properly and make huge money. Here is an example in the below image-
In intraday when you trade than you have only 6 hours , in these hours first 30 minutes is very volatile, because in early session lots of fund actions and large block deal happens.
So for a new trader its very risky to trade in these time duration, same happens in last 30 minutes before the market closing but not always.
Next thing is, in first session if the market is in downtrend, and your position is in a stock that is in uptrend then, the chances are because the market is not supportive in second half they could wipe out their gains. so finally at the end you will have to close your position either with profit or loss.
Second major issue with intraday is overtrading , suppose if you get loss in early session, then by human nature you will think that you can recover the loss , so to recover it you will do lots of trade again and again , and at the end you will have to pay a large amount for your broker as brokerage and taxes.
Next thing is using margin, trader use high margin to take profit, they generally use 10 to 20 times of margin on their capital that is very risky. If we take an example , suppose you have 10,000 in your account and you choose Stock A whose current market price is 500, so if you buy it without margin then you will have only 20 stocks , but if you use 20 times of margin in intraday then you can buy 400 quantity, now the risky part is —-
if stock goes 1% up that is 5 rupees then your profit would be 400 * 5= 2000 rupees
but if you entered at wrong place and stock goes 2% down that means 10 rupees , then you get a loss of 400 * 10 = 4000 rupees that is the 40% of your capital, next time you don’t have much capital to take trade, that ‘s the issue.
We say that positional trading is good because , suppose you have chosen a good quality stock then its possible it will not go up one day or couples of day but later it will catch the rally , then you can book your profit.
Now important point is when you trade in intraday then always trade with sufficient balance, don’t take too much of margin, so the advantage would be if you are in minor loss at the end and you think in coming 1 or two days stock will definitely go up then you can convert your intraday position to delivery. but for it you must have sufficient balance in your account.
So my advice would be if you have sufficient capital then try for swing trading with proper strategy and discipline. You can also try for intraday but don’t take too much of leverage and don’t do overtrade. That’s it for this article, if you found this article informative and helpful then don’t forget to share it with your friends and social media account. Thank You.