Scalping vs Swing Trading

Scalping vs Swing Trading

Scalping vs Swing Trading

 

This article will focus on forex scalping vs swing trading in forex. First, we will give an overview of both trading styles, discuss the differences between them and, lastly, talk about which strategy may be best suited for you.

As a beginner trader, you will inevitably get to a stage where you will have to decide between various trading styles and wonder which one will be the best suited for you. This decision should not be taken lightly as there are many important aspects to each trading style that needs to be considered.

Most novice traders are likely to experiment with most trading styles before they side with a strategy that fits their goals, time constraints and risk tolerance.

Scalping Forex

Scalping is the first trading style we will discuss. This trading style is arguably the most active of all, and traders who use this strategy (known as scalpers) aim to profit from small price changes by opening and closing positions multiple times within one trading day.

Scalpers will typically hold their positions anywhere from a few seconds to a maximum of a few minutes to achieve their target objectives. Leverage is often used to maximize their profit potential. However, where profit is concerned, the possibility of losses must also be factored in.

Scalpers implement their strategies on small timeframes, such as 1-, 5- and 15-minute charts. Their trading decisions are mostly based on technical analysis. Scalping indicators, chart patterns and candlestick patterns are forms of technical analysis that scalpers tend to use to gain an edge with this fast-paced trading style.

Successful scalpers rely on making small yet consistent incremental gains that compound over the long run, rather than aiming for large price moves that require positions to be held for more than a day or even longer.

What makes scalping different from swing trading is that scalpers are very active traders that execute their trades within one trading session by targeting small price fluctuations. Alternatively, swing traders operate on larger timeframes, trade less often and hold their positions for longer than a day.

Swing Trading in forex

swing trading

The swing trading style is very different from scalping and far less active. Swing trading strategies aim to identify and profit from large price swings in the markets. Positions can be held over a few days or weeks. Larger timeframes such as weekly, daily, 4-hour or even 1-hour charts may be used.

Swing trading strategies also tend to use a blend of fundamental and technical analysis skills and often use less leverage than scalpers would. Elliott wave theory, chart patterns and Fibonacci ratios are popular analysis methods used amongst swing traders.

Due to the larger profit objectives of a swing trader and the time that positions are held for, a swing trader will typically use a larger stop loss to give a market enough ‘room’ to move without getting ‘stopped out’ too quickly. That being said, a swing trader does not necessarily take on more risk than a scalper would because they use larger stop losses. Correct position sizing and proper risk management skills are still essential requirements to swing trade the markets successfully.

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Which is Most Profitable?

The answer to this question is that both trading styles can be profitable. The question you should be asking yourself is which one will fit your lifestyle, goals, and personality better when considering scalping vs Swing trading in forex.

Scalpers need to set aside time and maintain intense focus to trade multiple setups a day, whereas swing traders trade less often. So, the main deciding factor here is how much time you have to make either one of these trading styles worth your effort and profitable over the long run.

Your personal time constraints might provide the answer to finding the most profitable trading style that is right for you, but besides that, it is important to note that any trading style requires a lot of practice to build the necessary skill and experience to succeed. Losses must, inevitably, be factored in.

Which is Better for Beginners?

We have already talked about how important the availability of your time will be in choosing the right strategy. We have also listed a few important questions that beginner traders need to ask themselves to assist them with their decision-making. Read on as we explore the pertinent questions that you will next need to ask yourself when considering scalping vs Swing trading in forex.

scalping explanation

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

Perhaps you are the type of trader that prefers a fast-paced trading environment. Perhaps you are the type of trader more comfortable with taking your time. 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 income? Perhaps you are trading simply because you want to save money for retirement or a particular project you have in mind. Being aware of your trading goals is important and will certainly go some way towards helping you maintain your focus and discipline.

3. What style of analysis do you prefer?

It may be that you chose to base your trading decisions on fundamental analysis, or perhaps you find that you are more in tune with a technical analysis approach. A combination of both techniques may yield better trading results for you. It is important to pursue whatever means of analysis is the most appropriate for your trading style.

4. Do you have enough capital to trade a particular strategy?

The amount of funding that you assign to your trading account will greatly depend on the trading style you choose. Scalpers may require less margin in their trading accounts as they typically use fewer funds per trade. Swing traders, on the other hand, will probably use more of their funds per trade due to the lengthy periods that they hold their positions, which generally requires more margin.

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.

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 Swing 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 main differences between scalping vs Swing trading in forex, the key factor to consider is that both trading styles can be profitable and that there is no single trading style that is better than another. As highlighted, losses of capital can also be factors to consider.

    Finding the right trading style will greatly depend on your personality, lifestyle, goals, risk appetite and the analysis techniques that you like to use. The importance of proper risk management should be a crucial part of any strategy.

    With the points above in hand, the process of finding the right trading style can be made easier, but remember that success takes time. There should be no element of rush when trying out different trading styles, not until you are comfortable with what works for you.


    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.