If you’re looking for a profitable short-term trading strategy, chances are you’ve come across two popular strategies: Day trading and scalp trading. Both have pros and cons, and the choice between them can make a huge difference.
Let’s take a closer look at scalping, day trading, and their differences, so you can make an informed decision.
Table of Contents
What is Scalping?
Scalp trading, generally called scalping, is one of the fastest-paced trading strategies out there. Instead of waiting hours for a trade to play out, scalpers focus on making numerous small profits in minutes, even seconds.
The principle is simple: Get in, grab a small gain, and get out. Traders repeat this process dozens of times during a single trading session. Scalping trading helps you reduce risk exposure and increase the chances of profits.
Scalping requires constant focus and determination because missing a single exit point can quickly erase whatever you’ve earned.
What is Day Trading?
Day trading extends the time frame. Day traders, too, take advantage of short-term price movements. But they do so within a single trading day. The rule is simple: Don’t hold positions overnight.
Day traders open a position in the morning and close it before the day ends. Trades last for a few minutes to several hours. Instead of collecting tiny gains throughout the day, day traders focus on a handful of profitable moves.
You can utilise numerous technical indicators, such as the Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD), and Bollinger Bands.
Key Differences
The key differences between day trading and scalping include:
Trading Timeframe
This is pretty obvious. Day traders hold their positions from a few minutes to several hours, but always close before the market shuts. Scalpers go in and out within seconds.
Number of Trades
While there is no one-size-fits-all approach, day traders make 5 to 10 trades per trading session. Scalpers, on the other hand, can execute dozens, even hundreds of trades within one day.
Profit Per Trade
Day traders always prefer quality over quantity. They make a handful of trades and try to earn large gains. Scalpers let tiny profits accumulate. However, they need to execute trades with razor-sharp accuracy to get those small wins.
Stress Levels
Short-term trading is inherently stressful. One wrong move during an economic news release, and you can say goodbye to your profits. That said, scalping is a little heavy on the nerves. You need constant focus and tolerance for a high-pressure environment. Day trading offers some breathing room.
Tips for Success in Both Strategies
Whether you choose scalping or day trading, the road to success remains the same. First off, master the art of risk management. Never risk more than 1-2% on a single trade.
Moreover, keep your emotions in check. Don’t let fear, greed, and fear of missing out guide your moves. Rely on technical analysis tools and real-time charts.
Above all, work with a reliable trading broker to benefit from low-spread accounts and quick payouts.
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