Trading requires a set of special tools in order to work effectively. Yet, despite the fact that most traders have the necessary equipment to do the job, the question still remains when it comes to the internet speed. The short answer is a fast internet, but there are some differences between day trading and swing trading that influence the so-called, need for internet speed.
Day Trading vs. Swing Trading
There is a big difference between what it means to be a day trader or a swing trader. Day traders, as their name would suggest, do their trading during the day. They make use of all sorts of charting systems and technical analysis to monitor the market and implement their strategies. They make small transactions in stocks, commodities, and currencies without the risk of holding their positions overnight. Day traders spend an average minimum of about two hours trading every day.
With swift trading, on the other hand, the emphasis is placed on the price cycle. Swift traders try to spot the start of a directional price movement when they enter the trade and exit only when that price movement ends. In short, day traders tend to profit percentage-wise when they work with smaller accounts. Swing traders maintain their percentage returns as their account continues to grow.
When it comes to day trading, your internet connection plays a crucial role. Every second, there are thousands of data points streaming in and out of your computer, showing you how the prices are moving in real time. Your internet will have to process the information properly, otherwise, it will experience lag and present you with old data.
This means that you will not be able to see the current prices and will not be able to trade effectively. Day trading involves transactions at 1,5,15, or 30 minutes apart, which means that you can’t afford your internet to be lagging, even for a second.
Upload Speed – The upload speed of your internet translates to the amount data sent from your computer. Day traders need to have a good upload speed so as to place their orders in a timely fashion. If the upload speed is not satisfactory, then you may encounter constant delays. The bare minimum should be at 0.5 megabytes or 500 kilobytes. With this upload speed, you will have some small delays on occasion, but you will not encounter any major ones.
Download Speed – Your download speed in the day trader game translates to the amount of market data that comes into your computer. If your download speed is not quick enough, you will not be able to make informed decisions about where and when to sell or buy on the market. With that being said, the minimum download speed should be of 1 megabyte per second. With this speed, you will not experience any lagging when receiving information, unless you have an unstable internet connection.
Yet, despite the minimum upload and download speeds mentioned here, which will be satisfactory to a certain extent, the internet does sometimes tend to go down and offer you lower speeds. It is, thus, safer to double both the upload and download speed so that you will not experience any interruptions or delays. Therefore, having a 1-megabyte upload and 2-megabyte download speed should be the optimal minimum to consider.
Unlike day trading, swing trading is not so much about minute-to-minute transactions and split-second decisions, but more about identifying trends and assessing the risks involved. Swing traders can wait days for the prices to reach their forecasted range, making use of all order types available, such as buying limit orders to gradually enter trades at their most advantageous position or using the always-essential stop loss when exiting a reversing trade.
Swing trading is more appreciated by those who are able to see the big picture and who do not have the time or possibility to stay in front of the computer several hours per day. Making a profit in swing trading is all about using technical analysis to determine when the highs and lows of the price of an asset will take place and then setting the orders to balance the risk between the potential of an improving position and the safe close on the existing profits.
In short, swing trading does not require the same level of internet speed as day trading does, and it can be somewhat safe to say that a minimum of 0.5-megabytes upload and 1-megabyte download speed should be enough. Nevertheless, if the internet happens to be sluggish when you are trading, it can make you miss out on potential opportunities. Depending on your internet provider, we would recommend the highest internet connectivity possible so as to avoid any frustrations down the line.
Other Important Factors
It should go without saying that, besides a fast internet connection, you will also need a computer to be able to support your trading activities. It should be powerful enough so as to handle several streaming monitors at once.
If you truly want to be on the safe side, there are a couple more things to consider than just internet speed. There is the possibility, though small, to lose your internet connection for several hours. To make sure that these sorts of external factors will not impede your ability to trade; consider having an additional internet provider just in case something like that was to ever happen. You could also make use of your smartphone to act as a hotspot – even though this may not provide you with the required speed necessary to conduct your operations without any interruptions.
Likewise, there is a chance that your computer will stop working for whatever reason or you may lose power for several hours. It would be advisable to have an extra laptop with its battery fully charged so as to finish your daily trading activities.
In the end, it is up to the individual trader to choose his or her setup and internet connection. There are ample options available on the market that can secure both an adequate computer and fast internet while still being cost-effective.