CALCULATE YOUR SIP RETURNS
Angel One - Share Market Trading and Stock Broking
Open Demat AccountLogin

Swing Trading Vs Position Trading

•6 min read•by Angel One
Swing trading focuses on capturing short- to medium-term price movements over days or weeks. Position trading targets sustained long-term trends over weeks or months.
Share

In the world of investment, a variety of trading strategies have evolved, catering to different groups of traders.  Today, for any asset segment, you will find four main types of trading strategies - day trading, scalp trading, swing trading, and positional trading. If you are planning to enter the market, then you need to pick up a style of trading that suits your trading personality.    

As an investor, you need to put in a fair amount of time to understand each trading type to ensure that you choose according to your investment goals and preferences. To make it easier for you, in this article we will discuss position trading vs. swing trading —the two common forms of long-term trading. 

Key Takeaways 

  • Swing trading focuses on short- to medium-term price movements, holding positions for days or weeks using technical indicators to capture market swings.  

  • Position trading targets long-term trends, holding trades for weeks or months using both fundamental and technical analysis for steady growth.  

  • Swing trading offers quicker returns with frequent trades, while position trading builds wealth gradually with less monitoring and lower transaction costs.  

  • The ideal choice depends on risk appetite, capital, and time. Swing trading suits active traders, while position trading suits patient, long-term investors. 

Swing Trading 

Swing trading is directional trading, where the trader tries to take advantage of short-term price movements. Traders get involved in deals that span over several days or weeks. Unlike day traders, they trade infrequently and don’t close their position at day's end. They hold onto their position and wait for a larger profit to emerge. They take a bigger risk for a bigger profit, and therefore, sometimes swing traders also trade against the market trend.   

While some advanced swing trading strategies involve fading a move (taking a contrarian moving and betting against the trend), the most common and safer approach is to trade with the broader trend, aiming to capture swings within that trend. Trading against the trend is riskier and not a standard approach for all swing traders. They use market indicators and technical analysis to predict changes. When an asset enters the overbought or oversold area, the swing trader takes the opportunity to plan a trade.  

One difference between positional trading and swing trading is that the latter has more trading opportunities than the former. 

Positional Trading  

The duration of positional trading is closer to long-term investment. Position traders enter into deals that can last for weeks and even months. However, in investment, the investor enters only a long position, but in positional trading, traders enter into both short and long positions. With this trading strategy, traders avoid the daily gyrations that day traders undergo.  

Positional traders use an array of fundamental and technical analysis, trading indicators, and patterns to eliminate daily noise.  

On the fundamental level, positional traders rely on industry and company information to form a decision on their asset. They pick stocks that they believe will grow significantly over a period.   They spend a lot of time finding assets that are worth their attention.  

Also, read Guide to Positional Trading Strategy here 

Difference Between Swing Trading and Position Trading 

Investing is one of the most recognised and traditional forms of position trading, and the general advice that successful investors give is to hold investments in share portfolios, funds and pension plans for the  long-term. Here’s a brief overview of swing vs position trading.

Aspect 

Swing Trading 

Position Trading 

Holding Period 

Held for several days to weeks. 

Held for weeks to several months, up to a year in strong trends. 

Objective 

Capture short- to medium-term price swings for quicker profits. 

Benefit from long-term price trends for sustained growth. 

Analysis Used 

Uses fundamental analysis for what to buy/sell and technical analysis for when to enter/exit. 

Uses technical analysis for when to buy/sell and may use basic fundamental analysis for screening viable stocks. 

Trading Frequency 

More frequent trades with multiple opportunities. 

Fewer trades, focusing on strong long-term setups. 

Risk Level 

Higher frequency of risk events, requires tighter risk management.  

Lower frequency of risk events but higher magnitude of loss, due to exposure to major economic events.  

Capital Requirement 

Moderate, suitable for traders with limited capital. 

Higher, as positions must sustain through long market cycles. 

Profit Potential 

Offers quicker and potentially higher short-term returns. 

Generates steady, long-term wealth accumulation. 

Market Focus 

Responds to short-term price fluctuations. 

Focus on broader trends, not short-term fluctuations. 

Both swing trading and positional trading rely on fundamental analysis at some point to make decisions about going long or short. Whether you are a swing or positional trader, you can take a look at the fundamental indicators like projected earnings growth, price to book ratio and return on equity before making a decision. 

Swing Trading vs Position Trading: Which One Should You Choose? 

The right approach depends on your goals, risk appetite, and time.  

Choose swing trading if:   

  • You love short-term action 

  • Want quick returns 

  • Want to explore multiple trading opportunities 

  • Are able to continuously monitor your positions   

Choose position trading if:   

  • You prefer patience and minimal monitoring  

  • Want to invest in long-term goals 

  • Prefer low brokerage and tax costs 

Pros & Cons of Swing Trade and Position Trade 

Let us look at the benefits and drawbacks of swing trading vs position trading: 

Swing Trading  

Pros: 

  • Less time commitment than day trading 

  • Quicker results 

  • Flexibility to exit swing positions relatively quickly  

Cons: 

  • Requires continuous monitoring 

  • Can miss out on larger gains 

  • Requires proficiency  

Position Trading  

Pros: 

  • No constant monitoring required 

  • Potential for high profits 

  • Low transactional costs 

  • Allows riding out fluctuations  

Cons: 

  • Slower returns 

  • Capital can be tied up 

  • Hard to predict long-term trends 

  • Higher risk from major events 

Conclusion 

There has been a long-standing debate about whether to trade in swing trading vs position trading. If you are wondering which to choose, swing trading vs position trading, there is no right answer. While both swing trading and position trading are very popular, several factors will help you find your trading style.   

Traders with a higher risk tolerance for sustained capital exposure often choose position trading. Those who prefer shorter exposure time and tighter per-trade risk limits may prefer swing trading. Whether you go for swing trading or position trading, using the right tools can set you up for high success.  

FAQs

Swing vs position trading are favoured in different market conditions based on their time horizon and analytical approaches. Trending markets, which are volatile, are more suited to swing trading, in which prices fluctuate over a short to medium term, while position trading thrives in markets with sustained, strong, long-term trends.  

The time horizons in swing vs position trading are different and therefore need different risk management strategies. In positional trading, traders generally hold assets for longer tenures, ranging from weeks to months or even years. It requires broader stop-losses to smooth out the market noise, and larger, less frequent losses are accepted with the trade bearing higher levels of market exposure. In the shorter-term, swing trading is preferred, where day or week-long price fluctuations are taken. Traders use a smaller stop-loss to limit loss on a single trade, resulting in more frequent but smaller possible losses. This time variance determines a trader's capital investment, stop-loss policy, and general risk-taking in the market, thereby shaping the risk profile. 

There is no clear answer to swing vs position trading; the best option depends on your risk appetite, objectives, time, and market conditions, among other factors. Swing trading offers faster, more frequent gains, but it is also riskier due to the volatility of the short-term market. Position trading aims at larger gains with fewer frequent trades over a longer period of time. It works with short-term market noise, but also needs more capital and patience. You need to monitor more frequently in swing trading than in position trading.

Position trading also presents a promise of high profits because of the ability to take advantage of the big, long-term market trends, which have the potential to allow greater returns per trade than shorter-term trading techniques such as swing and day trading. Nonetheless, it cannot be assured that it is the most lucrative, as the general performance will depend greatly on the trader's competence and discipline, as well as the market's risks and conditions. 

 

Open Free Demat Account!
Join our 3 Cr+ happy customers