The Differences between Scalping and Swing Trading

When trading stocks, forex, futures, crypto and other types of assets, one of the factors that define any given strategy is the amount of a time a position is held.

This is true for scalping and swing trading, two of the most common short-term trading styles, although some other factors and characteristics set them apart.

Swing trading is arguably the most popular, especially for beginners, as it allows traders to identify broad trends and use technical analysis and charts to make moves to procure profits over several days or even weeks.

On the other hand, scalping requires more experience and expertise as traders typically conduct hundreds or thousands of trades during a single session to make the most of micro-movements in the market. The expectation is making smaller gains, albeit at a larger volume.

What is swing trading?

Swing trading is a relaxed, fluid style of trading ideal for part-time traders who want to make several trades a day and hold a position over several sessions. While not defined as a long-term style, it is when compared to the rapid decision making required for scalping.

Trading charts on iPad and PC computer screens

However, that does not mean swing traders can adopt a lackadaisical approach to identifying trends and making moves. The most successful traders still dedicate several hours a day to analysing markets and studying resistance and support mechanisms to identify the right opportunities.

Swing traders typically follow major trends after a currency or stock has a correction or correlation. They generally “go long” when there is an uptrend and “go short” when there is a downside. They do not usually concern themselves with super short-term volatility either.

What is scalping?

Scalping is a more targeted, rapid style where traders make a larger number of moves in any given day and sometimes hold an asset for just a few seconds. Scalpers never hold a position overnight.

This short-term mindset means scalpers are entering and exiting positions all day with such limited exposure reducing risk. However, they cannot rely on fundamental tools and instead look to use one-minute charts and tick-based visuals to exploit the spread for profits.

Scalpers need to make decisions quickly, remain calm amidst the chaos and have a more defined strategy to deliver consistent gains.

Strategy level

After making an eToro minimum deposit, you will have easy access to short and long-term investments, which means both scalping and swing styles are open to you when you start. This is an exciting time as you will be able to forge your own path and use your expertise to drive profits with – depending on your region and country – as little as 50 dollars.

Data analysis and research

When deciding on whether to swing or scalp, the characteristics of each style should guide you, as well as your financial targets and objectives. Each style has its risks and potential rewards, as noted earlier.

One key area where the two strategies differ is target profit. Swing traders often attempt to “squeeze” an uptrend on a currency pair or cryptocurrency to gain a profit of up to 500 pips. In contrast, scalpers usually target around ten to 20 pips. Scalpers make up for the lower potential gains by completing many more trades during the day.

This outlook means scalpers do not have to factor in longer-term trends or the “bigger picture” as they instead home in on the minutiae of current trends, potential volatility and precise movement timings to get ahead.

Scalpers make gains when a currency pair’s bid-ask spread changes, traditionally with a view to buying the pair when the dynamic between the bid and ask spread narrows. They then sell when the spread widens.

Buy and sell forex

Swing traders are less concerned about short-term volatility or movements and need to be patient, holding onto positions for days and weeks at a time if necessary.

Beginners usually opt for a swing style because there is less tracking and monitoring involved. Keeping up to date with significant developments and corporate events, coupled with robust analysis of relevant charts is required, but the stress level is lower.

To conclude, there is no single, perfect strategy that traders can deploy to make profits in forex or stock markets. You will need to learn, experiment and practice with different methods. Both scalping and swing styles could work for you depending on your temperament, expertise and financial objectives.

This article is for information and educational purposes only and does not form a recommendation to invest or otherwise. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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