The main difference is the holding time of a position. Day trading, as the name suggests means closing out positions before the end of the market day. However, as chart patterns will show when you swing trade you take on the risk of overnight gaps emerging up or down against your position. As a result, when swing trading, you often take a smaller position size than if you were day trading, as intraday traders frequently utilise leverage to take larger position sizes.
Having said that, swing traders can capitalise on up to 50% overnight margin. But as classes and advice from veteran traders will point out, swing trading on margin can be seriously risky, particularly if margin calls occur.
So swing trading or day trading isn’t so much about what you want to trade, be it commodities, such as oil futures or stocks from the Cac 40. Instead, it’s simply the time. So while day traders will look at 4 hourly and daily charts, the swing trader will be more concerned with multi-day charts and candlestick patterns. In fact, some of the most popular include:
Moving average crossovers
Head and shoulders patterns
Cup-and-handle patterns
Double bottoms
Shooting stars
Triangles
Flags
One final day difference in swing trading vs scalping and day trading is the use of stop-loss strategies. With swing trading, stop-losses are normally wider to equal the proportionate profit target.