December 20, 2017

Day trading: Scalp or Swing?

To Scalp or to Swing

To become a successful trader, you need to know when to scalp and when to swing. Keep in mind, though, that we’re not talking about swing dancing here even if it does look like a whole lot of fun.

We’re talking about a different kind of fun activity. Swing traders are after a few windfall gains based on market trends. And, let’s be honest, it’s those “big” trades that draw new dancers to the floor every day. On the other hand, as a scalp trader, your primary goal should be to string together pocket profits to develop a large and consistent revenue stream.

However, before you begin using either approach, you need to understand the difference between trading and investing. Day traders intend to hold securities for short, sometimes very short (seconds) amounts of time in hopes of making small profits. Investors are the complete opposite — they’re in it for the long haul. That’s not to say one is better than the other. They’re just different approaches that appeal to different people.

The fine art of scalping

If you want to make good money from scalp trading, you must be willing to put the time in every day. Scalping profits are earned piecemeal, one trade at a time. At first glance, the profits seem small. However, string them all together and you’re suddenly tap dancing pretty well.

As a day trader, you can use scalping for your primary strategy or to fill in the gaps between swing trades. Remember there is no pattern to follow as a scalper. You need to be focused, react on the fly to minor fluctuations in prices, and remain ready to reference tick charts. Your average holding period will range from seconds to minutes, and when the day ends, you’re done.

Ultimately, you want to make as many scalp trades as you can as fast as possible in order to minimize risk. The good thing about scalping is that even in a still market, you can usually reap steady, minor gains.

Swinging

Unlike scalp traders who look to make numerous trades in a day, swing traders are willing to go long or short term. They follow the trends that yield their best chances of making a profit.

Swing trades are typically held for a few days. However, depending on the trend, the holding period may be weeks or even months. Also, unlike scalp traders who try to complete hundreds of trades a day, swing traders rely on a few, highly profitable trades.

To Scalp or to Swing

Swing trading requires patience and an ability to identify and understand market trends. If you’re new to the stock market, swing trading is the safer bet, and will allow you to learn as you go without being danced right off the floor.

However, if you’re a quick thinker who likes to operate under high-stress conditions and make snappy decisions, scalp trading can be an exciting and profitable pursuit. Ultimately, to maximize trading profits, you need to be willing to don whatever hat works in the moment and will give you the best chance of success.

You should also be willing to seek outside help from other experienced traders. For example, by connecting with members of trading communities like Chartify, you can trade, compare, follow top traders – and dance your way to trading success.

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