To swing or not to swing: Scalping vs. swing trading

scalping vs swing trading
To swing or not to swing: Scalping vs. swing trading
October 31, 2018 Mackenzie Andrillon
scalping vs swing trading

The world of investing is broken down into many parts and as a new investor it can be challenging to get started. There are many paths including different markets, strategies and investment styles. In this case, we’re talking about two specific styles of trading the Forex market — scalping and swing trading.

Scalping

Scalping is a strategy that targets small market movements to build maximum profits in a short timeframe. This is achieved by entering and exiting the market, taking profit from small price changes.

Benefits and challenges of scalping

Scalping is a fast players game. This strategy involves getting in and out positions on a consistent basis.

Benefits:

  • Positions are typically held for a short period of time, making for a swift transaction.
  • Because trades are made much faster, it can curb major losses.
  • It’s clean and simple allowing for a lower chance for the market to reverse.
  • Requires less analysis time and shorter time frames (5-15 minutes).
  • Investors can utilize indicators to seek out movements on the fly.

Challenges:

  • Requires discipline and focus to make quick decisions to spot multiple opportunities in the market.
  • Not the best strategy for beginners due to the amount of monitoring and speed of trading involved.
  • There are some brokers that do not allow scalping on their platforms.
  • Because there are so many trades placed in a given day or time frame, one loss can wipe out previous gains.

Swing Trading

Swing trading is a style of trading as positions are held for longer than a day. Trades are held within a day to several weeks based on fundamental market analysis.

Benefits and challenges of swing trading

Swing trading is a very popular method of trading for many levels of investors.

Benefits:

  • Because it is a technical strategy, there are clear and defined boundaries creating less risk at times.
  • Going into the market every couple of days makes it easier to identify more opportunities.
  • Often times, stop losses are smaller than long term trades allowing placement of larger sized positions.

Challenges:

  • This trading style is more technical and takes a different mindset that can calm nerves surrounding longer term investments.
  • There is typically more risk involved as the trades are held longer.
  • Depending on the chart time frame you’re looking at, it’s easy to pull out of a trade without looking at the trend as a whole.
  • Better suited for moderate to advanced traders because there is more technical analysis needed.

Swing trading vs. scalping

While swing trading and scalping have their differences, stacking them side by side helps to narrow down your best fit.

Swing Trading Scalping
Level of trader Beginners, moderate and seasoned traders Moderate to advanced traders
Strategy level Moderate in difficulty Advanced
Targeted profits Larger profit targets with fewer trades Many small profit targets
Chart time frames 1-4 hours daily and weekly charts 1-15 minute charts
Number of trades Few trades a week 5-plus trades a day
Trade length Trades are most commonly held a few days at a time but could take weeks or months to close out Very short from seconds to minutes

 

Selecting the best fit strategy revolves around your personality and how much time you’re willing to spend trading.  Typically, traders will mix both or even more styles of trading into their routine to diversify their portfolios. In conclusion, the strategy that will serve an investor best is one that will work with the waves of the market that is ever changing.

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