Day trading, investing…we see these terms used interchangeably all too often. The reality is that investing and day trading are completely different strategies.  

Although they have similarities, it’s crucial that you know the differences so you can choose the right style for you. So, to help, here’s a comparison between day trading and investing. 

What Is Day Trading?

Day trading means buying and selling assets within a single trading day. Day traders start when the markets open and close their position at night. They rarely – if ever – hold assets overnight. 

The goal of day trading is to exploit short-term price swings. The aim is to buy when prices are low and sell again when there’s profit to be made.  

Day traders, as a result, may gravitate towards more volatile markets. However, you can buy or sell any assets as a day trader, including on the Forex marketplace. 

Pros and Cons of Day Trading

Day trading can result in impressive short-term profits. But it’s not for everyone. Let’s look at the pros and cons of day trading.  

The pros: 

• There’s no need to worry about holding positions overnight. 
• Short-term gains can be highly lucrative.  
• It’s flexible. You can day trade from anywhere, including a home office.  
• Day trading involves constant action, which is exciting for the right trader.  

The cons: 

• You can’t enjoy the benefit of long-term price changes. 
• It does require some technical knowledge of markets to be successful. 
• There’s a significant time commitment involved. 
• Some traders find the constant movement overwhelming. 

What Is Investing? 

Investing also means buying an asset and selling it, later, at a higher price. However, the goal is to hold an asset for a much longer timeframe and watch it grow. Investors usually build a diverse portfolio, with assets across more “stable” markets with less short-term fluctuations.  

Investing means having the time, and patience, to own an asset for months or even years. It’s a long game, but it can generate impressive profits over time.  

Pros and Cons of Investing 

As with day trading, investing has its pros and cons.  

The pros?  

• Less market or technical knowledge is required. 
• You can benefit from long-term price changes. 
• It’s less stressful for some traders who prefer a steadier approach. 

What about the cons?  

• Stock prices can fluctuate significantly. You can’t predict this months or years in advance. 
• Owning assets long-term can be expensive due to tax implications.  
• It’s less engaging and more passive – some traders find it monotonous.  
• Depending on your strategy, the returns may not be all that impressive, given how long you hold an asset. 

Differences Between Investing and Day Trading 

It’s true that day trading and investing share similarities. However, there are clear differences between trading and investing – here are the four most important.  

1. Asset Hold Time

Traders and investors hold assets for significantly different timeframes.  

Traders look for short-term opportunities. For example, day traders focus on maximizing profits within a single trading day. And others may look at making trades over the course of days or weeks.  

Trading is not about ownership. It’s about making the most of short-term price swings. 

Investors look for long-term growth. They plan on owning, or retaining, assets for a period of time. They hope to make profits from long-term price trends, which could mean riding out short-term losses. 

2. Trading Style  

In many ways, investing is more “relaxed” and predictable than day trading. Investors won’t check their assets so often, for one thing. And they may rely on financial advisors or other professionals to manage a portfolio for them.  

Day trading, on the other hand, is fast. It’s exhilarating. Day traders are constantly evaluating their position and planning their next move. It’s an entirely different style of buying and selling assets.    

3. Risk Profile 

Long-term investing may involve less overall risk than day trading. This is because long-term investors may focus on steadier, more “predictable” assets to build a portfolio.  

That said, it’s not necessarily the most profitable way to buy or sell assets. And all investing involves an element of risk. 

Day trading can at least seem riskier than investing. After all, day traders are focused on volatile, day-to-day price changes. However, experienced day traders know how to effectively manage their risk. Or they know to partner with prop firms who can help them hone their skills. 

4. Knowledge Required 

Day traders must develop the skills required to make a profit in a fast-paced environment. They need a thorough understanding of their market. And they must be confident with technical analysis e.g. reading stock patterns.  

Investors don’t need as much knowledge. This is true even if we compare day trading vs. stock investing. For one thing, they may rely on others to manage their investments for them. But even if they manage their own investments, they’re typically investing in less volatile markets.  

Investment vs. Trading: Which Is Right for You? 

Now we’ve compared day trading vs. investing, one question remains: which is best for you? Unfortunately, there’s no simple answer to this question. It all depends on factors such as: 

• Time: How much time can you dedicate to buying and selling assets? Day traders often trade full-time because it’s time-consuming. Investors, on the other hand, manage investments in the background.   
• Personality: Day trading can, for some individuals, feel too stressful. Depending on your nature, you might prefer more relaxed, long-term investing. Or you might thrive on the thrill of short-term trading. Consider your nature before choosing an option. 
• Knowledge: Do you completely understand your chosen market? Or do you at least have the time to develop this knowledge? If the answer to either question is “no”, you might be better served with long-term investing.  

Your Day Trading Journey Starts at Maven Trading

Are you ready to grow your skills as a day trader? Choose Maven Trading. We offer simulated funded accounts to promising traders at all levels of experience. With low spreads, quick withdrawals, and competitive fees, we’re serious about working with the best traders.  

We’re not just a prop firm – we’re a prop firm that supports you. Discover your potential. Learn the art of day trading with Maven Trading. Try a challenge and start your trader journey today!