Traders use different trading approaches to leverage short-term price differences while buying and selling stocks. “Scalping” and “swing trading” are two such short-term trading strategies that traders use to make profits from price differences. The two strategies mainly differ in their applied investment, time, and commitment styles. If you have just begun trading, understanding the differences between the two methods will help you identify the best approach to meet your risk-return trading criteria. Continue reading to learn more about the difference between scalp and swing trading and to determine which one is a better fit for you.
What is Scalping?
A scalping strategy implies conducting multiple trades within a short duration, lasting between a few seconds and a few minutes, to leverage price movements. Your profits per trade may be limited, but you still gain from the hundreds of transactions executed in a day. There are reduced risks compared to risks from long-term exposure. The technique requires a lot of your time and effort.
What is Swing Trading?
Under the swing trading strategy, you can profit based on a short-term fluctuation in a stock’s price. You could hold on to the stock position for a few days to a few weeks until the market reaches your desired profit level. There is a risk involved with your position that remains open. Still, there is a chance of making substantial gains from the short-term price swings.
Key Differences Swing Trading vs. Scalp Trading
Understanding the significant differences between the two short-term strategies will help you evaluate which trading style would be right for you:
|Parameters||Swing Trading||Scalp Trading|
|Trend changes||The swing technique lasts for a few days to a few weeks. Market trends are considered to impact swing technique.||The scaling approach lasts up to a few minutes and involves fast transactions. So, there is no need for long-term trend analysis.|
|Profits||Swing traders gain higher profitmargins. Swing traders undertake fewer transactions than scalpers but earn higher profit margins per trade as they hold on to the stock for a longer time.||Scalpers, or scalpers, gain faster profits. Scalpers gain small profits per trade and can execute many trades during the day. Benefit from daily profits.|
|Risk||Riskier than scalp technique. The swing technique has a higher risk as you hold the stock position for a longer duration than the scalp technique||By applying the scalping strategy, losses are minimised by eliminating market reverse chances.|
|Vigilance and Commitment||Less vigilance and commitment are required than scalp traders. Swing traders can enter their position, like setting up a stop loss or undertaking a profit order, and then carry on their other normal activities, requiring less vigilance and commitment.||More vigilance and commitment are required. To make a good profit in a scalping trade, many trades need to be executed during the day, requiring more vigilance and commitment.|
|Stress and pressure||The swing strategy is less stressful as you hold the position for a few days to weeks.||Need to have intense focus, so more stress and pressure are involved.|
|Suitability||Even a beginner can start as a swing trader by opening an online trading account with a small amount.||Scalping involves high stakes, vigilance, and focus, so it is more suitable for seasoned traders.|
The scalping trading strategy implies holding stock for a few minutes, while in a swing trading strategy, a trader trades in a financial asset by holding it for a few days/weeks. Depending on your investment objective, commitment, and risk preference, you can select between the scalping and swing strategies.
Disclaimer: This blog is not an investment advisory piece. Trading and investing in the securities market carries risk. Please do your due diligence or consult a trained financial professional before investing.