Scalping vs Day Trading

daytrading

daytrading

 

In this article, we will be discussing forex day trading vs forex scalping, what their key differences are, and which strategy may be best suited to your trading style.

When it comes to trading the forex market, most beginner traders, at first, find it difficult to process all the information that inevitably comes their way. While it is important to understand the multiple facets required to successfully trade the markets, many inexperienced traders can get stuck when choosing the right trading style that suits them as an individual.

There are four primary trading styles – namely, scalping, day trading, swing trading and position trading. While all of them have one objective in mind – which is to make money – they do have distinct differences in the strategies used and the time commitments required to implement them.

In this article, we will be discussing day trading vs scalping, what their key differences are, and which strategy may be best suited to your trading style.

Scalping

Scalping simply refers to the act of quickly entering and exiting positions in the forex market by targeting small price movements. Due to the small target objectives, ‘scalp’ traders can generally hold a position anywhere from a few seconds to a maximum of a few minutes, often using leverage to maximise their profit potential.

The most popular timeframes that scalpers use are the 1-, 5- and 15-minute chartsScalping strategies mostly include technical analysis techniques such as scalping indicators, chart patterns and candlestick patterns to identify trading opportunities.

To make money, scalpers rely on making small yet consistent gains that compound over the long term. However, all their trading activities are conducted during a single trading session without carrying positions over to the next day.

In essence, scalping can be defined as day trading because all trades happen during the course of one day. Yet, not all day traders can be considered to be scalpers.

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Day Trading

scalping vs daytrading

Day trading, as the name suggests, refers to traders that open and close their positions within one trading session. Like scalpers, they do not carry any positions over to the next day.

What makes the day trading style different from scalping is that traders generally hold their trading positions for longer periods of time – anywhere from a few minutes up to a few hours using larger timeframes like the 5-, 15-, 30- and 1-hour charts.

Day traders also use strategies that rely on technical indicators, chart patterns and candlestick patterns to identify trading opportunities. But where a scalper targets small price movements with short holding times, a day trader targets larger price movements.

Which is Most Profitable?

Scalping vs day trading – which forex strategy is most profitable? The answer to this question is that both can be profitable, but both, of course, are susceptible to risks and loss in capital.

The question that the traders should really be asking is ‘which trading style is right for you?’. There are many crucial factors to consider before you choose which style of trading you would like to try out.

As a scalper, you need time, intense focus, and discipline to trade multiple setups a day. Whereas a day trading strategy may require less of your time, you will likely be trading less often.

Some traders may have a higher tolerance to risk than others, which can make one trading style more attractive than the other.

Most beginner traders, at first, believe that trading will be easy. However, they quickly get a rude awakening when they realise that it is not. This is not to say that trading cannot be profitable, but like most things in life, success comes with practice and the more experience you have the better you will become at trading.

Which is Better for Beginners?

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Scalping and day trading strategies can both be suited to beginner traders, but again, finding the best trading style will entirely depend on a trader’s personality, skills, and experience. There is no one-size-fits-all trading style. Perhaps the best approach to take as a beginner trader will be to experiment and evaluate strategies that are based on both of these styles.

Here are a few questions that beginner traders need to ask themselves which may help with their trading decision.

1. After experimenting with both trading styles, which one do you feel the most comfortable with?

Perhaps you like a fast-paced trading environment, or maybe you prefer to take your time and not feel rushed. Some traders may have a higher risk tolerance than others, which can make one trading style more appealing than the other.

2. What are your long-term financial trading goals?

Do you dream of becoming a full-time trader or do you want to supplement your day-to-day income? Perhaps you want to save more money for retirement. Knowing what your trading goals are is important and will help you stay disciplined in order to achieve them.

3. What style of analysis do you prefer?

Some traders might prefer to base their trading decisions on fundamental analysis or find that they are better at technical analysis. Perhaps a combination of both techniques yields better trading results.

Whatever your answers to these important considerations might be, proper risk management remains a crucial part of trading, no matter which trading style you decide on – volatility and the potential for losses must be constant concerns to remain aware of.

Avoiding common pitfalls that beginner traders tend to make, such as using too much leverage, trading without a stop loss, over-trading and breaking the rules of their trading strategies, need to be avoided at all costs. Successful traders are experts at managing their risk, regardless of the trading style they prefer.

The Best Scalping and Day Trading Brokers

Broker Features Regulator Platforms Next Step
Number One Broker tickmill_logo-174% of retail CFD accounts lose money Founded: 2014
74% of retail C...
  • Well regulated
  • Ultra-fast and high leverage trading
  • Spreads as low as 0.0 pips
  • Comprehensive research tools
  • Relatively limited number of markets
  • Does not accept US traders
FSA SC MT4, MT5
Blackbull LogoYour capital is at risk Founded: 2014
  • User-friendly platform with great trade-analysis tools
  • Leverage Up To 1:500
  • Spreads as low as 0.00 pips
  • Quality trade execution thanks to high-spec IT infrastructure
  • $0 minimum account opening balance
  • 26,000 tradeable instruments
  • Not available in all jurisdictions
  • Regulatory infrastructure
FSPR MT4
Your capital is at risk Founded: 2006
Europe* CFDs ar...
  • Multi-asset broker offering a wide variety of markets
  • Strong regulatory framework
  • Innovative risk management tools
  • Choice of market-leading platforms
  • Wide spreads on some markets
  • Expiry date on Demo Accounts
ASIC, FSA, FSB, MiFID MetaTrader4, Sirix, AvaOptions, AvaTrader, Mirror Trader
Between 74-89% of CFD traders lose Founded: 2010
Between 74-89 % of retail investor accounts lose money when trading CFDs
  • Low trading costs
  • Great market flow
  • Research and analysis which helps spot trades
  • Wide range of Copy and Social Trading options
  • Limited range of non-forex markets
ASIC, FCA MetaTrader 4, MetaTrader 5, cTrader
eToro Logo77% of CFD traders lose Founded: 2007
77 % of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
  • Social and Copy Trading Platform
  • Beginner Friendly
  • Risk-free Demo Account
  • Top-tier regulation
  • Limited means of raising queries
  • Withdrawal process isn’t really ‘client-focused’
ASIC, CySEC, FCA eToro Platform
XM LogoYour capital is at risk Founded: 2009, 2015, 2017
  • Low minimum deposit
  • Super- tight bid-offer spreads
  • Impressive trading platforms
  • Tier-1 regulators
  • Difficult to contact tech support
  • No Crypto
ASIC, CySEC, IFSC MT4 Terminal, MT4 for Mac, Web Trader, iPhone/iPad Trader, Droid Trader, Mobile Trader, MT5
FxPro LogoYour capital is at risk Founded: 2006
  • Very well regulated
  • Comprehensive education section
  • Fantastic customer service
  • No cryptocurrencies
  • Fees could be more competetive
CySEC, DFSA, FCA, FSB, SIA MetaTrader4, MetaTrader5, cTrader, FxPro Edge (Beta)

    After comparing the key differences between scalping vs day trading, we can conclude that both trading styles can be profitable and that there is no single trading style that is better than another. However, while profits may be possible, it remains important to realise the risks involved. Losses of capital must always be factored into any form of trading and the strategy you employ.

    Finding the right trading style that fits your personality and time commitment is a very important part of trading, which will require you to perhaps try both styles until you find the one you are most comfortable with.

    With the right mindset, effort and level of discipline, the trader should be able to quickly build up enough experience to make the right decisions and assess the pros and cons of each of the strategies mentioned above.


    Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.