Scalping vs Swing trading: an overview
By Vladyslav Yudashkin Updated November 21, 2022
Trend trading is one of the safest ways to make money on the currency market. It is based on the fact that traders, like a crowd, create a mass movement pushing everyone who swims against the current out of the market. The choice of trading style is an important element in trading strategies. If you are a technical analyst you will most likely choose scalping, day trading or swing trading styles.
Scalping is an aggressive method of intraday trading and is therefore more suitable for traders than investors. Scalpers who earn on the market steadily and for a long time have iron nerves, enormous patience and have no gambling at all.
Swing trading includes a combination of strategies based on entering the market in the direction of the main trend. In doing so, one enters the market when the price rebounds in the opposite direction. Such approach allows gaining the maximum profit as in addition to the trend movement a trader may also earn from the correctional pullback. Often the correction can be more than 30-50 pips, which is also a good profit margin.
Basics of swing trading and scalp trading
It can happen that by opening an intraday position, the trader gets into an emerging trend and watches profits accumulate as the trend develops. At the end of the day a picture emerges that gives a high potential for trend continuation and indicates the advisability of moving the position overnight. The traditional methods of short-term trading (scalping and intraday) require closing a position at the end of the trading session, which on the one hand minimizes the risk, but on the other hand reduces the potential profit. However, there is a style of trading that combines both intraday and overnight trading – swing trading. Swing trading is something between intraday trading and position trading.
Classic swing trading is based on technical analysis and an understanding of chart analysis and trading volume analysis. Swing traders also use indicator analysis when necessary and sometimes fundamental analysis as well (because news and statistics can be drivers that trigger price momentum).
Swing trading is the method of trading that can be used when trading stocks. The purpose of swing trading is to identify a general trend and then to make a profit by trading on the swing in a particular trend. The technique of such trading is very simple – a trader buys cheaper assets and then sells them at a higher price or vice versa. There are many trading strategies, which differ in the way the market is analysed, the point of entering and the position management.
Everyone knows that trading by fluctuations is a special type of trading. By applying this method, you will have the very “cream of the crop” from value fluctuations, which raise stocks in uptrends and lower them in downtrends.
Ideally, a swing is composed of a group of consecutive daily bars. All of these bars have the highest maximum and the lowest minimum. A succession of bars with highs that are smaller and lows that are smaller creates a downward swing.
Here your goal is to open and then hold the trade until the stock moves with some positive or negative (if the trade is short) momentum. If the price starts to reverse or correct, you should close the trade. This type of trading is mainly used for the daily charts. Roughly, this is all you need to do to become a successful swing trader.
This type of stock trading relies on careful checking using fundamental and technical analysis. Swing traders often specialise in a particular business or industry so that they become experts in the price movements of those stocks. They also have more time to study company financial reports or industry forecasts.
The great skills for a trader are stamina and the ability to seize the moment. Inexperienced traders are better off increasing their deposit smoothly rather than abruptly. In addition, you should not trade when there is newsworthy information that can influence the course of events and the price of currency pairs.
Since swing trading does not require many hours of daily monitoring, it is a good strategy for a trader who wants to make money from trading the stock market without having to turn it into a full-time profession. Even the study of reports can be done during the daily commute, or during the lunch hour, so swing traders stay well informed. Swing trading is good because it doesn’t require delving into financial statements, catching market tops and bottoms, or worrying that your profits might evaporate because of overnight gaps that don’t do you any good if you leave trades for the next day.
Scalping is a method of trading in financial markets where a trader creates trades lasting from a couple of minutes to several hours. In some moments, scalping is attributed to intraday trading, but more often this method is called intraday-trading.
Taking into consideration the non-long-term type of opening of deals a profit is usually a few pips (sometimes dozens). Small profit is compensated by the large number of created deals. Where a short-term trader opens one trend trade, a scalper creates many and catches corrections. Thus, a scalper can gain more profit than a short-term trader for the same period of time.
From psychological and technical points of view, scalping is a complex type of trading. At the same time, it is possible to gain trading experience as quickly as possible. It is achieved due to numerous daily deals. More about training you can find out at our course .
Day Trading Explained
Intraday or intraday trading is in demand among those who have been in the field for a long time and have some experience. In this case, as a rule, a trading formation is used. In simple words, it is trading along the trend, trend breakdown and catching the impulse movement.
By using this strategy, traders make an order of magnitude less trades in a single trading session. One, two, five and fifteen minute timeframes are used to enter a position. This type of trading is characterized by accurate market entries. There is also no overnight rollover. Often, in this strategy, all positions are closed even before the clearing. Everything happens on demand in the risk management system.
This type of trading suits a large number of traders. It is times easier than scalping and allows making trades in a leisurely mode. This strategy allows quickly gaining experience as well as sharpening your trading skills.
Scalping vs Day Trading vs Swing Trading
No strategy is perfect. Just like the others, such short-term trading strategies have both good and bad sides. Any merits of these strategies are ensured only if a trader knows how to look for the right trends and trade correctly. Intuition and analytics are important in this type of trading, so you will know when to hold a position and when to close it, as well as whether to buy or sell.
Swing trading gives a chance to earn regardless of the market trend. A trader can find the right trends and feel the potential profit to be made from certain trades, thus earning income in any case. Also swing trading, like active trading, does not take a lot of energy and does not disturb you emotionally. As opposed to intraday strategies or scalping, this kind of trading can promise really large profits.
As opposed to intraday trading, swing trading often involves long stretches of time, so the initial installments should be larger. Also, it is very difficult to start without investments. You need to have at least minimal experience to be able to determine the phase of the cycle, where the market is and how the trend is moving. If you do not have any basic knowledge you will not be able to estimate risk and profit.
A swing is a part of the market cycle. You have to be an analyst to use swing shifts, which allows you to work flexibly and use different tactics depending on the situation. It takes time to learn a strategy, which is hard, but well worth it. The time you spend will be repaid many times over.
A swing trader is often engaged in studying long-term fundamental stock trends and is able to hold assets not only for a few hours but also for weeks, months – depending on how long the trend lasts. How long a trend lasts depends on the mood of the market, in general. This option is indicated either by the value of the index in which the stock is included or by the positive news of the area in which the firm operates and its quarterly results.
Is Swing Trading Safer Than Day Trading?
Every type of trading has certain risks. Swing trading as a method of trading, in some points, is equated with eastern spiritual practices, because a trader should be calm and professional, but at the same time versatile. A successful swing trader needs knowledge of theoretical trading information, understanding of how trends are conducted, determination of cycle patterns and prices, as well as the ability to analyze. Therefore, the safety of any particular trading method depends on the skills of the trader.
Is scalping the same as day trading?
Scalping implies complete presence and control over the trades, while day trading gives a trader some freedom and a chance to be morally calmer. This type of trading suits a large number of traders. Conditionally, it can be considered as a much lighter version of scalping as it enables you to make deals in a leisurely mode. This strategy enables one to gain experience as well as to improve skills of trading on the Forex market.
What is swing vs scalp?
We do not force you to use any particular strategy, because it is up to you individually. The difference between swing and scalp trading is also specific to each individual, you can find out more in our course . This solution is great for experienced traders or those just starting their career, as they will get the chance to develop their personal trading style with our mentor.