Scalping vs. Swing Trading: What's the Difference?

When it comes to active trading there are two main strategies scalping and swing trading. Each has its own advantages and disadvantages. In this blog post, we'll explore both strategies to help you figure out which one suits you best.

What is Scalping?

Scalping is a fast paced trading strategy where people aim to make small profits by buying and selling stocks or other assets very quickly. They do this by making lots of trades throughout the day, sometimes hundreds. Each trade is held for just a few seconds to a few minutes.

Because each trade aims for only a small profit scalpers need to do lots of trades to make money. They don't wait around for big price movements instead, they look for tiny changes in the stock price. They often take advantage of the difference between the buying and selling prices called the bid ask spread to make their profits.

To do scalping effectively traders need to use short term charts that show price movements over minutes or even seconds. They also need fast and accurate data about stock prices and the ability to make trades quickly. High trading fees can eat into profits so scalpers usually prefer brokers with low fees.

Scalping works best for people who can spend a lot of time watching the markets, stay focused under pressure and make quick decisions. It's a strategy for people who are okay with taking on stress and acting fast to seize small opportunities for profit.

Pros of Scalping

Scalping a trading strategy has two main benefits. It can be quite profitable because scalpers aim to make money from small changes in prices. Since they buy and sell quickly, they can make lots of trades in a short time which adds up to profits even though each trade individually may not make much. Secondly, there's limited risk involved because they're in and out of trades so fast. This means they're less exposed to potential losses because they don't hold onto assets for long reducing the chance of a big loss on any single trade.

Cons of Scalping

Scalping in trading involves quickly buying and selling assets to profit from small price changes. It's super intense because you have to act fast and watch the screen all the time. This constant vigilance can be exhausting, like having a full time job staring at numbers. Plus, it's stressful because if you hesitate you might miss a chance to make money.

Another downside is that it's easy to get carried away and make impulsive trades instead of sticking to your plan. This can lead to losses or missing out on potential gains. So, while scalping can be lucrative it's not for everyone due to the stress, time commitment and temptation to deviate from your strategy.

Swing Trading

Swing trading is a method where traders aim to profit from short to medium term price movements in stocks. They look for stocks that are trending strongly either going up or down. When they see a stock has corrected or consolidated after a trend they jump in hoping to catch the next upward move. They sell when they think they've made a decent profit. If a stock breaks through a support level they might bet on it falling further by short selling.

Swing traders don't hold onto stocks for too long usually from a few days to a few weeks. They're not as quick as day traders, who buy and sell within a day but not as patient as trend traders who hold for months or even years. They use technical analysis and charts to figure out the best times to buy and sell. They pay attention to things like resistance and support levels and sometimes use tools like Fibonacci extensions and other indicators to help them.

Swing trading is good for people who can't watch the markets all day long. Part time traders who can only check in now and then often like this strategy. Sometimes you have to hold onto stocks overnight which can be nerve-wracking. And it's important to review how stocks are doing before the market opens and after it closes. This strategy works best for people who can stay calm in uncertain situations and are willing to be patient for the right opportunities.

Pros of Swing Trading

Swing trading offers several advantages over scalping. It's less stressful because traders have more time to make decisions as they focus on larger price movements over a longer period. Swing trading requires less time commitment making it feasible for those with full time jobs. Moreover, swing traders can potentially earn higher profits per trade due to the larger price movements they target. Lastly, swing trading may be easier for beginners to learn since it mainly involves understanding chart patterns and swing trading indicators which can be less mentally demanding than mastering scalping techniques.

Cons of Swing Trading

Swing trading has its downsides, just like any other type of trading. One major risk is that it can be quite risky but that's true for all trading methods.

If you're someone who craves constant action and wants to be involved in the stock market all the time swing trading might not be the best fit. It requires patience and if you're constantly tempted to make trades you might end up hurting your profits by trading too often.

Another drawback is that swing trading usually takes longer to show results. Since swing traders are aiming for bigger price movements, it can take days or even weeks for a trade to fully develop. This slow pace can be frustrating, and you might miss out on other opportunities while waiting for your trades to pan out.

Scalping vs Swing Trading
 

Conclusion

When you're deciding between swing trading and scalp trading, think about what you want to achieve with your investments and how much time you have to manage your strategy. Scalp trading requires constant attention to the market and quick decision making. You're aiming to make small profits from short term price movements.

On the other hand, swing trading is about aiming for larger profits by capitalizing on market movements over a longer period. It's less intense than scalp trading but still requires monitoring. It's a good idea to have more than one trading strategy so you can adapt to different market conditions.