Scalping and swing trading are two of the most popular trading strategies, with the main difference being the frequency and size of the trades placed.
I’ll take you through the main features of each trading strategy including why I believe scalping to be more user-friendly for beginners, and I’ll explore some of the pros and cons between scalping vs swing trading.
Also consider: Discover my top forex scalping strategies
- The main difference between scalping and swing trading is the frequency and quality of trades.
- A scalping trading style relies on frequent, smaller trades made throughout a single trading day and held for short periods, aiming to stack up smaller wins into notable returns.
- Swing trading revolves around finding the highs and lows of a trend, and then acting accordingly to generate returns over a longer time frame.
- Both scalping and swing trading strategies can be used to trade a variety of assets, although they are typically associated with forex trading.
What is scalping?
Scalping involves making multiple trades in a single session, looking to generate small profits from frequent trades. You might make tens or even hundreds of trades in a single day, hoping that these small profit targets will add up to notable returns.
While your returns for each individual trade are generally smaller than with other strategies, that means your risk of losing large sums in one go is also reduced.
Equally, you may be able to use leverage from your broker, allowing you to trade greater sums than you have deposited in your account. This can magnify your gains, but also your losses, so you need to take care when using leverage.
Scalp traders typically conduct technical analysis to quickly identify a number of potentially profitable trades in a single session. They’ll then look to make trades with very short holding periods, exiting market positions within a time frame of anything from a few hours, to a few minutes, down to a few seconds.
You can buy assets that you think will increase in value (“going long”) or that you think will decrease (“going short”) when scalping.
A scalp trader will typically never leave a position open for more than a day. This can help to reduce the risk of markets moving against you during the trading session.
This also means you’ll need to actively keep an eye on your trades throughout the day, monitoring price action and reacting quickly to any changes.
Is scalping better than day trading?
Rather than being better, scalp trading is actually a form of day trading, as all your trades take place within the same trading day.
The difference between the two is that day traders will usually target two or three quality trades for their returns, rather than stacking up smaller returns as you would when scalping.
So, the answer is not whether one is better than the other, but which would best suit your trading goals, knowledge, and risk tolerance.
Pros of a scalping strategy
- Profits are generated from multiple, small successful trades, and gains can be magnified with leverage
- Allows you to take advantage of trading opportunities and smaller price movements
- The shorter time frame typically means you’re less exposed to shifting market conditions, typically reducing risk.
Cons of a scalping strategy
- Requires market knowledge and risk management skills to correctly identify entry and exit points
- Is a highly active strategy, meaning you need to dedicate sufficient time to it – scalping is a full-time job for many traders
- Returns for each trade are typically smaller than with other trading strategies, and losses may be magnified if you use leverage.
What is swing trading?
Swing traders aim to identify market trends before they happen, and then buy or sell accordingly. You can go long or short when swing trading.
For example, swing traders might buy a forex pair that they think will increase in value over the coming days, and then exit the position when it does. Equally, they might look to short a stock that they expect to fall in value in a few weeks’ time.
A swing trader will generally use a range of technical indicators to find a pattern or market trend. They might use the moving average convergence/divergence (MACD) indicator, or the relative strength index (RSI) of an asset to predict future price movement.
Unlike scalping, swing trading might involve keeping your trades open for a few days, and potentially even a few weeks. A successful swing trading strategy will generally involve regularly keeping an eye on these positions, perhaps checking on prices hourly, half-daily, or daily.
Swing traders usually make far fewer trades than scalpers, perhaps placing one or two a day and then leaving them open.
Swing trading is comparable to position trading, in that your trades do act almost like a long-term investment. Gains from a single trade tend to be larger than other strategies when swing trading, and you will typically have access to leverage which can magnify these.
One issue you may need to contend with is that, often, swing trading requires you to have greater risk tolerance, as your trading outcomes could be affected by a range of factors.
As you hold your position for longer, you’re at greater risk of market movement. If you’re swing trading on stocks, this could be weekend price gaps, while swing traders focusing on forex may see their positions change dramatically overnight – the forex market is open for trading 24/7.
If you’re trading with leverage, any losses you incur as a result of these price swings will be magnified.
Pros of a swing trading strategy
- Potential to generate larger returns from one trade, rather than having to make multiple trades in a single session
- Typically requires less time watching markets – hourly, half-daily, or daily checks can be sufficient
- Only focusing on technical indicators rather than fundamentals can be easier for some traders.
Cons of a swing trading strategy
- You’ll need to be confident in undertaking technical analysis to identify the correct trades
- More risk of price swings moving against you over the longer term, or market sentiment shifting and affecting your swing trades
- You’re unlikely to benefit from lucrative short-term moves that can be more accessible when scalping.
In summary: similarities and differences between scalping and swing trading
Scalp traders enter and exit the market quickly, from a few seconds to a few hours, and will almost always seek to close their positions before the end of the trading day.
Swing traders, on the other hand, usually have a longer time horizon. While this could be just a few hours, it could be as long as a few days – or even weeks – if they believe an asset could move further in their chosen direction.
The gains that swing traders can generate from a single trade can also be greater, whereas scalpers will generally need to place many more trades to achieve the equivalent returns.
In exchange for this greater potential for returns, swing traders have to face the potential risk of the market moving against them while they hold their assets. Someone following a scalp trading strategy will not have these concerns, as they will generally exit their trades on the same day, removing this consideration entirely.
While there are significant differences between them, there is some crossover between these two trading styles.
For example, both scalpers and swing traders make use of technical analysis to identify the trades that they’re interested in, rather than fundamental analysis. This might involve looking at:
- Price trends
- Chart patterns
- Moving average convergence/divergence (MACD) indicators
- Fibonacci sequences
Both strategies revolve around successfully predicting the direction of an asset’s price, and you can predict that it will increase (also known as “going long”) or decrease (“going short”) when using either of these styles. You may be able to access leverage through your broker to magnify gains, too – although remember, any losses will also be magnified.
They both can also be used to generate returns from a range of assets, including stocks, forex, commodities, and more.
Swing trading vs scalping: which is best for beginners?
Generally speaking, scalping is likely to be a lower-risk method of trading for beginners for two reasons:
- The trades are smaller, meaning you’re less likely to lose large sums in one go – depending on how much (if any) leverage you choose.
- You’re less likely to be affected by market sentiment and news announcements, as your trades will generally be closed within 24 hours.
However, both of these methods could present risk for novice traders. For example, if you don’t understand how to conduct technical analysis, or how to implement this knowledge into profitable trades, using either strategy could see you lose money while trading.
Ultimately, the most sensible course of action is often to create a trading plan that aligns with your trading goals. For example, if you have the time to spend looking at markets, scalping may suit you.
However, if you’d prefer a strategy that will still involve analysis but then less time spent watching markets, swing trading may suit you better.
If you’re looking to become a full-time trader, you may want to consider combining multiple strategies to create the trading experience you want.
Scalping vs Swing Trading FAQs
What is the difference between a scalp and a swing trade?
Is scalping more profitable than swing trading?
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.