If you find yourself asking: “is swing trading better than scalping?” or “do scalpers make more money than day traders?”, then keep reading this blog and you’ll find the answers to all your questions.
Most of the aspiring traders are asking me at the beginning of their Forex journey: “what trading approach is the most profitable?” And usually, I answer that it depends on their personal circumstances and trading objectives. But more important is their personality traits because most of the time trading comes down to psychology.
My point is that there are not 2 traders alike, but before we get started let’s clear out a few aspects.
What is day trading?
The best way to describe day trading is to picture someone that sits in front of his computer for several hours a day, looking to enter and exit trades within the calendar day. It doesn’t mean that he’ll never hold trades overnight because he will. But usually day traders don’t do it and they close trades within the calendar day.
To be a day trader it means you need to trade around your day job. Generally, a day trader has between five to seven hours a day to analyze the charts and to look for trade opportunities that may appear several times a day.
What is a swing trader?
On the other hand, a swing trader is looking for longer-term trades, on the higher timeframe charts. As a swing trader, you can trade for a couple of days to several weeks.
There are short term swing traders, which means they trade for less than a week. The medium termed swing traders usually are from a week to a month. And lastly, a longterm swing trader could be measured in terms of weeks and months.
At the other end of the spectrum, there is the investor who is looking into months and even years.
What scalper means?
The scalpers are very time-sensitive because usually, they are in the trade for a few minutes or even a few seconds. As the name implies, they’re looking to scalp out small profits multiple times a day and hoping to have more winners than losers.
What trading approach is most profitable?
The scalper is a very popular form of trading, because of the feel factor. Especially in the Forex market where it’s so easy to enter and exit the trades and you can set up a trading account with a small amount of money.
A person that has a limited time to spend in front of the screens, it may be attracted to scalping. Scalpers will generally risk a small percentage amounts of the account so that the trades will affect them adversely. But for the small risk, the gains are equally small on each trade.
For gamblers, the natural reaction when they’re losing is to fight a losing streak with a bigger risk on the next trade. If you’re going into the scalping methodology, make sure you don’t have these gambling traits, especially if you’re a newbie trader.
Brokers generally love aspiring traders who choose the scalping approach. Why? Because most of them end up blowing up their trading accounts while they are still paying the broker commission. This is why most of these brokers will offer huge bonuses and leverage to get you into trading.
It’s fair to say that it’s not advisable to start your trading journey as a scalper. Things can happen very quickly and the adrenaline highs and the lows can be very hard to deal with. You need to have the experience so that you know how your emotions will react in these conditions. It requires a lot of disciplined to become a successful scalper. You need to be able to control your emotions which is very hard without experience.
Personally, I find this approach way too stressful.
After that, there is the swing trading which tends to be at a much slower pace. Traders can do their analysis in a short period of time. It’s great for those that just have 10, 20, 30 minutes to spend in front of the charts.
Usually, swing traders analyze the markets over a longer period of time and place the trades with a pending order. The emotions and stress of a swing trader are considerably less than a scalper.
Remember, most traders lose because of the emotions and not from the fact that they called the market wrong.
If you want to trade fundamentals and technicals, then a swing trading approach can be the right choice, because the price action signals are more accurate over the longer time period projections.
A swing trader may risk between 0.5% to 2% of the account on each trade. This means fewer trades will be taken, so the chances of a complete wipeout will be decreased.
Day Trading Personality
Next, we have the day trading which is basically what I’m doing. As day traders we don’t force trades because we have time to spend in front of the screens. We’re not limited to just an hour a day to analyze the markets and we are patient traders.
In terms of risking it could be a rate between 0.25% and 0.5% on each trade. Day traders usually have a few trades in a day or no trades at all.
The emotions are a lot less intense as a day trader. The signals using the higher time frames, such as the one hour or the four hours, can be much powerful. It stands to reason that fewer trades means less stress.
However, one of the biggest problems is that beginner traders only have a limited amount of time for the screens, so they start by day trading. It’s easy to get frustrated when the trades aren’t successful which leads to losses in the trading account.
My advice for you, if you want to embark on a trading career is to analyze how much time you can spend in front of the trading screens. This will help to choose the best-suited approach for you.
Then you have to look at your personality and consider your objections. Take into your account why you are starting trading: to increase your income or to trade full time as a professional?
For example, if you’re an aspiring trader, you should start on the higher timeframes, with the swing trading approach. This way the emotions will not affect you as it happens with most traders.
On the other hand, scalping is great for those that have a high temperament and a disciplined approach. So after you’ll manage the higher timeframes, you could start trading the lower timeframes as well.
As always if you liked this blog, leave a comment below. Until next time happy trading and good luck! I hope to see you in the Trading Room.