What is Day Trading? Making trades in the stock market while they are open for regular or extended hours. A day trader often buys and sells the same stock multiple times during the day depending on the price action. Day traders can make hundreds or thousands of dollars if a stock moves a few pennies. They have to invest a lot to do this though, and it’s best when they can identify technical patterns such as a bull flag, cup and handle, reverse head and shoulders, or a healthy distance above the 50 or 200 EMA. The bet can either be for a stock to go up (going long), or down (shorting the stock). Day traders usually don’t like to leave much in the market overnight due to external events that could impact their P&L.
Swing trade is not for “buy and hold” long term investors, it’s meant to get in and get out over a defined period of time. With swing trading, one identifies the same types of technical charting patterns from day trading, but lets them play out in slow motion over a few days, weeks or months. It also helps to have a catalyst such as a good earnings report, or FDA approval for a a new drug. When swing trading, after making your stock purchase, It’s always a good idea to setup stop losses (say at 10%) after making the initial trade so you can get out without losing more than you want to automatically without having to monitor the market all day. It also works in the other direction as well – one would setup a limit order to sell at a profit once reaching a profit target.
I entered a swing trade for XRT, the SPDR Retail ETF because I believed over the Thanksgiving Holiday, retail would do well, and the basket of retail stocks in XRT would go up. It did just that, but unfortunately I got greedy and didn’t get out of the trade when I should have, so I’m still holding, and will have to wait until it hits my profit target of 20$.