I made a trading simulator to see if day trading is better or swing trading is better.
Do you know which one you should trade?
Which one has a higher chance of making you a successful trader?
You see, I started as a day trader around eight nine years ago.
But nowadays, I mainly do swing trading on higher timeframes.
Does that mean I found day trading to be bad and swing trading to be better?
Well, let me show you the data.
If you think I’m doing swing trading more because it makes more money, then let me run the first test and show you something.
I made this trading simulation run 1000 day traders and 1000 swing traders at the same time.
The semi-transparent orange lines you are seeing are the account balances of the one thousand day traders taking trades.
The thick orange line shows the middle point of all those 1,000 traders.
Similarly, the semi-transparent blue lines are the account balances of the one thousand swing traders.
The thick blue line is their middle point.
I want you to pay attention to the thick lines.
If the orange line is higher than the blue line, then day trading is better than swing trading.
If the blue line is on top, then swing trading is better.
Which one do you think will be on top if I run multiple tests with different things that affect day and swing trading success rates?
Well, in test 1, I made both day and swing traders take trades with a 55% win rate, a 1-to-1 reward-risk ratio, and a risk of 1% of the current account per trade.
This is a pretty normal setup.
I have tested many different trading strategies 100 times on the Trading Rush channel that got a better win rate than what I’m using here.
So nothing here is too over the top.
Which one do you think will make more profit if I let day traders take five trades a day and swing traders take three trades a week for a year?
If you think day trading should make more money because more trades mean more money, then you are correct.
The profit from day trading was way higher than from swing trading!
But not only that, another reason why day trading profit is so high is that we are risking 1% of the current account per trade.
We are not using 1% of the starting account balance.
In other words, we are compounding after every single trade.
This compounding method increases the profit and reduces the loss according to the testing data we saw in a previous Trading Rush video.
But since day trading made way more profit, does this mean swing trading sucks, and you should definitely day trade?
This sounds like a trick question, right?
I mean, if day trading was so good, why would anyone swing trade?
And on top of that, why did I switch to swing trading?
Well, let me run test 2.
But this time, let me make the simulation a bit more realistic.
You see, a lot of trading movement is random.
There are only a few market scenarios where the probability of a pattern repeating increases.
These include support and resistance areas.
I have tested the way I draw support and resistance 100 times, and it worked around 60% of the time.
Basically, when people see the support and resistance, most of them react to it in the same way.
But this only works if most people can see it in the first place.
If the support and resistance are so clearly visible that even your neighbor’s dog talks about them, then they will have a higher probability of working.
But if not many people can see them, then not many people will react to them in a similar way.
That’s exactly what happens to most support resistance areas and other strategies on the smaller timeframes. They get a relatively lower win rate.
In my eight nine years of trading experience, most strategies work better on the higher timeframes, and suck more on the smaller timeframes.
On top of that, there is also something called market noise.
Basically, when people buy and sell, especially on higher timeframes, they don’t care about what the smaller-timeframe price movement is doing.
It’s irrelevant to them.
But their buy sell orders move the price up and down on the smaller timeframes.
Many times, there can be trend-like moves and other nice-looking setups on the smaller timeframes, but they will be completely random.
They will be a result of this market noise.
I have even made a video showing how good some of this random noise looks.
Day traders usually trade on smaller timeframes, and speaking from experience, it is very difficult to filter out the market noise as a day trader.
So, in the second test, day traders will randomly end up taking trades in a bad market around 60% of the time, and swing traders will take bad market trades around 40% of the time.
They are not going to lose money in the bad market in the long run.
I mean, I have done multiple tests on the Trading Rush channel that show that even if you take random trades, your win rate will be at breakeven.
You will not make or lose money in the long run.
So, do you think day traders will make less money than swing traders in Test 2?
Well, if you think that day traders will still make more money because, even though 60% of their trades are not making or losing money, they are still taking a lot of trades and those trades will result in more profit than swing trading, you are absolutely correct.
In test 2, day trading still made a much higher profit than swing trading.
Does this mean day trading is clearly better now?
If you think it’s a trick question again, well, then you are one suspicious-looking fella.
But you are right.
You see, there is just one problem.
We are forgetting about the middleman who likes to take a piece of our profit.
I’m talking about the broker and exchange that take a little bit from our profit and loss.
They charge us fees for taking the trades.
In my trading journey, I was paying around 10% of the profit or loss in fees and similar things while day trading on smaller timeframes.
And while swing trading on the higher timeframes, I was only paying around 1% or less in fees.
Wait a minute, why is a day trader paying more in fees and a swing trader paying way less?
Well, you see, to make a $100 profit in a tiny profit distance, you have to take a big position.
Even if your loss is limited at the stop-loss, you still have to use a big position size to make that $100 profit.
But swing traders who trade on higher timeframes need a much smaller position size to make that same $100 profit.
I mean, even if the setup looks exactly the same, a higher-timeframe profit distance is wider in price terms compared to a profit distance of a smaller timeframe.
So, in test 3, day traders gave 10% of their profit or loss in fees, and swing traders gave 1%.
Do you think day traders will still make more money than swing traders?
Well, if you think this will be the tipping point, since day traders are taking a lot of trades and their small fees will slowly eat the total profit over time, especially since 60% of the trades are breakeven, then you are absolutely right!
If you can spot the few semi-transparent orange lines, you will see that only a few day traders made money, and most of them lost money because of fees.
Does that mean day trading is finally bad and swing trading is just better?
Well, not yet.
You see, when I was mainly day trading on the smaller timeframes, I used to include the broker fees in the profit and loss distance.
Like, I used to take a slightly bigger profit and a slightly smaller loss to account for the fees.
It didn’t change my win rate that much.
I mean, it did lower my win rate slightly, but a trading win rate is not like a coin toss that stays stable.
So, my win rate didn’t go so low that it started to cause a loss consistently.
In fact, I used a 55% win rate in this test since it can be achieved relatively easily.
Some of the strategies I have tested on the Trading Rush channel gave a much higher win rate than that.
On top of that, as a day trader gains more experience, they will also learn to identify good and bad setups.
So, the probability of an experienced day trader taking trades in a bad market will be lower.
So, if we run the test again with a slightly higher win rate and a slightly lower bad-market probability, you will see that day trading covers the fees, and the profit goes up in the long run.
However, what I just said is really, really, really difficult to do.
Like, most day traders will lose a lot of money before getting good enough to spot bad markets or maintain a higher win rate.
This is one of the main reasons most day traders fail.
Even in this simulation, some of the 1,000 day traders are making a nice profit; they are going to buy a Ferrari and sell you ten-thousand-dollar courses.
But it’s just luck.
The middle line is showing the reality.
Most day traders will certainly fail in the long run.
But remember a very important thing.
I’m only talking about the majority of strategies here.
Like, most strategies suck on smaller, day-trading timeframes and work well on higher timeframes.
On the other hand, I have used a few strategies that specifically work on smaller day trading timeframes and don’t work on higher swing trading timeframes.
These include VWAP bounce and some similar momentum strategies.
I have had multiple green profit days in a row and around a 30% profit in a month multiple times because of these day trading strategies.
On top of that, I have seen a few traders make a lot of money from day trading because they perfected a specific strategy.
However, that’s really rare.
I spent many years failing before figuring out how to trade short-term day-trading momentum.
Swing trading strategies, on the other hand, were much easier to make money with.
The simple fact is, most strategies just suck on smaller timeframes because of all the market noise.
Even if you get good at the strategy, the fees are just going to make things worse.
Overall, most day traders are not going to make a profit.
Because multiple things are designed to make day traders lose.
Many swing traders, on the other hand, will become profitable much easily.
There are fewer things holding swing traders back.
Does that mean swing trading is clearly better now?
Well, not exactly!
I mean, swing trading is the safer, more reliable path.
Day trading is like trying to become a pro athlete, where a few people make a fortune, but the vast majority just end up with a dream.
But hold that thought.
Let me run test 4.
You see, when I was day trading, especially in my beginner days, I used to get tired after staring at the charts for too long.
And then, I used to see things that were not even there.
I used to take trades, only to question why I took them later.
On top of that, after losing back-to-back, all trading rules used to go out the window.
I used to revenge-trade.
Basically, day trading was not only stressful, but it was also way easier to take trades based on emotions.
Day trading also requires quick decision-making.
When you combine all this, you have a mess where there is less logic and more emotion-based decisions.
Swing trading, on the other hand, was much better in this case.
I mean, there was a time gap of many hours or even days between each trade.
Even if I lost back-to-back, a good night’s sleep would clear most of the emotions, and the next trade would be taken more in line with the rules.
I have blown up trading accounts because emotions got in the way while day trading.
I used to risk too much on a single trade to recover the loss.
But I have never blown up a trading account while swing trading.
So, in test 4, day traders will have around a 30% probability of making an emotion-based decision, breaking money management rules, and risking way more than normal.
Swing traders will only have around a 5% chance.
These numbers are based on my own day and swing trading experience!
What do you think will happen now?
Do you think day trading will even make money?
Well, if you thought day traders were going to have a bloodbath, then you are absolutely right!
The day traders’ accounts took a nosedive pretty quickly.
But if you thought swing traders would once again make a profit, then you will be surprised.
They also made a loss, but it was only around 20%, even after a long time.
The day traders straight-up blew up their accounts quickly.
Both of them lost money this time because no matter how good your strategy is, if you break money management rules, risk too much on a single trade, or let your emotions take over and start revenge-trading, you will most definitely lose money.
That’s what happened here.
Does it really mean day trading is bad and you should avoid it?
Well, not exactly.
There is one very important thing!
There was an important reason why I started as a day trader instead of a swing trader!
You see, when I was getting into trading, I saw multiple traders who had more than 10 years of experience but still couldn’t make a profit overall.
I noticed that they were all swing traders who only took a few trades a month.
Now, tell me this.
Even though the swing traders have made a profit in four out of five tests, who do you think has gained more live trading experience and learned more about trading?
If you said swing traders because they made a profit, then you are wrong.
You see, even though day traders are failing most of the time, they are getting feedback on their trades much faster.
Their high number of trades is giving them live trading experience faster than swing traders.
They are learning about money management, how emotions impact things, and how to deal with bad market conditions.
They are looking at thousands and thousands of setups; they will know how to differentiate between a good market and a bad market faster than any swing trader will.
I know they will because I have literally spent thousands and thousands of hours taking trades on smaller timeframes, such as the one-minute.
I used to spend almost the entire day trading on the one-minute timeframe when I started.
A trader who spends time taking thousands of trades in the first year will have gained more live trading experience than a swing trader with 10 years of experience.
That’s why I started day trading.
Now, obviously, I was a beginner then; I didn’t know day trading had such a low probability of making me a successful trader.
But even after around nine years of trading experience, if I were to start again, I would choose day trading to gain experience faster than anything else.
That experience will teach you more than any ten-thousand-dollar trading guru ever will.
And guess what?
With all that fast experience, you will know if you want to continue as a trader or not.
You don’t have to spend 10 years like some of the people I have seen, just to realize trading wasn’t for you.
That time-saving advantage can be a life-changer.
But what if you have a job, or want to spend time with your family?
What if you don’t get enough time to look at the charts?
Should you still try to day trade?
Well, the thing is, even if you spend less time at charts, you will still find more day trades on smaller timeframes than swing trades on higher timeframes.
In previous videos, I have said that swing traders can also find enough setups to trade like day traders because there are many charts to trade.
But that’s only after you have passed the learning stage and are trying to find setups to grow the account.
I mean, when your main goal is to learn more and faster, then combining smaller timeframe day trading with multiple stocks, forex, bitcoin, or whatever else you can find to trade, will teach more than swing trading ever will.
So, even if you get less time to trade, day trading on smaller timeframes is the best way to gain live trading experience faster.
But does that mean you should day trade even when the data says you will have a lower probability of making money?
Well, hold on.
Let me tell you why I mainly do swing trading now!
You see, before the 2022 market crash, I was doing both day trading and swing trading.
But this market crash forced me to take long-term swing positions.
I even took some high-leverage swing positions and moved safer investments into high-risk positions.
The market crash setups were just that good, and the probability of making a profit was just that high.
Those positions then resulted in the highest profit of my trading journey.
I even shared those trades live, with Trading Rush Patreon supporters.
After that big profit, I kept trading on the higher timeframes.
Since the profit from the market crash positions had created a big upward spike in my profit graph, the reason to day trade disappeared.
I mean, the swing trading profits were now like the account size I was day trading with before the crash.
So, why deal with the stress that comes with day trading every single day when the swing trading profit is good enough?
The interesting thing is, I like trading more now than before. It’s probably because it’s now more stress-free.
So, you can also do what I did.
If you are a beginner trader, don’t waste 10 years figuring out things that you can do in one year.
You can use day trading to gain live market experience faster than anything else!
Once you have gained enough experience, you can check if you like day trading or not.
I mean, you will already know by this point because of all the experience.
But if you like day trading and don’t feel that stressed, then you will have no reason to switch to swing trading.
But an even better thing is, you can do both!
No one said you only had to pick one.
You can day and swing trade at the same time, especially to gain experience even faster.
Beginner me was a bit stupid and didn’t think of this around 9 years ago.
I was mainly trading around the 1-minute timeframe and then slowly started to move to the higher timeframes.
But if you just start learning from every single timeframe, every single stock, forex, and everything else, then you will learn things even faster than I did.
And after gaining enough experience, if you think that you will have to stick to the chart the entire day, well, no, you don’t have to.
When I found my working day trading strategy in the stock market, which was a momentum strategy, I only used to trade for like the first hour or two after the market opened.
That’s because the momentum is really good near the first hour of the market.
The rest of the day, I did anything I wanted. And while swing trading, most of the time, I don’t even open charts for more than 15 minutes at a time.
I mean, I do analyze the chart for more than 15 minutes when I’m about to take a trade.
But when I’m just looking for setups, scanning and analyzing things, it takes less than 15 minutes.
Many times, it’s even a few seconds if I only have a few charts I actually want to trade.
In both day and swing trading, after the learning phase, I had enough time to do whatever I wanted.
So, both day trading and swing trading don’t require you to stare at the chart the entire day after the learning phase.
Now, you might be wondering how long it takes to pass the learning stage. Like, how much live trading experience is enough?
Well, it really depends.
I mean, when I started trading, I was doing pretty much random things, trying random strategies until something worked.
I thought most trading gurus were talking nonsense, and my best way to figure out the truth was to follow the data.
So, I tested everything I could. Every strategy and indicator.
This data and experience taught me more than anything online.
Also, 9 years ago, there was no tested data, or at least, I didn’t find any data about trading strategies.
It was just a hope that the trading guru was right. Most of the time, they were a moron.
But now, people have figured out what works and doesn’t.
On top of that, most of the things I found working according to the data, I have tested again on the Trading Rush channel and website.
So, you basically have my entire eight nine years of knowledge and data on the Trading Rush channel and website.
You have a lot more resources to learn faster than I ever did.
As long as you follow the data and learn from each trade you take, you will learn most things about trading pretty fast.
Also, I almost forgot.
I started day trading with the smallest account size the broker allowed, which was $10.
That’s one of the main reasons I was able to survive for around nine years in trading.
If I had started with everything, I would have lost everything.
I added more money to my trading account only if I made around a 30% profit on the previous amount.
This way, I was only risking more when I had learned things and actually made some progress.
Because of this, my account grew with my experience, instead of me losing everything when I didn’t know much.
In other words, when the probability of losing everything was high, my account size was smaller. And when the probability of losing was low, my account size was bigger.
Remember that day trading has a much higher probability of leading to a loss.
So, start trading on a practice demo account or with a really small amount like I did.
Never start with a big account, even if your neighbor’s dog says you are very good at trading.
If you want to see how I’m trading in the live market right now, want to see how I made a 100% profit in a year, want to see the foundation series for better trading psychology, and more, you can support Trading Rush on Patreon.
You can even support for free and see the free indicators I have made.
One of them disappears in the range market to increase the win rate, according to data.
The link is in the description!
Thanks for watching!