Scalpers vs. Day traders. Which is better?

There are many different styles of trading suited to risk tolerance and time commitments. The most common include scalping, day trading, swing trading, and position trading. The difference between these styles is how long trades are held open. The key difference between scalping and day trading is the trade duration.

Trades in scalping are held for a few minutes at a time. Trades in day trading are held from a few minutes to a few hours. Swing trades are often held for a few days, and position trades from a few days to even a few years.

In this article, we’ll compare day trading and scalping and see which is better.

Scalping

Scalping is a short-term trading strategy where scalpers hold positions for very short time frames (seconds to minutes) and close all trades before the end of a trading session. It requires quick decision-making, a good understanding of the markets, and high risk tolerance.

It also requires many hours of practice to learn the chosen markets well. Because of this, scalpers rarely trade more than one or two markets as it is very difficult to focus on a several markets in the day. Scalping involves a high level of leverage and is used to create opportunities from the volume of trades placed.

What makes a good scalping strategy?

A good scalping strategy has several main characteristics to maximise profit and minimise risk in fast-paced trading environments.

Scalpers need very liquid markets to enter and exit positions quickly without significant price slippage.

Trading instruments with tight bid-ask spreads mean lower transaction costs, ideal for traders aiming for small gains per trade.

Scalping requires lightning-fast trade execution. The often use DMA (direct market access) and low-latency trading platforms to increase the ability to profit from small price fluctuations.

Setting tight stop-loss orders is necessary to limit potential losses. To protect their capital, scalpers need to follow risk management rules.

Scalpers depend on technical indicators such as moving averages, Bollinger Bands, and Relative Strength Index (RSI) to identify short-term price trends and the best time to enter and exit trades.

Scalping needs consistency and discipline to follow a trading plan. Discipline and emotional control are essential for avoiding impulsive decisions.

Leverage can magnify profits from small price movements. However, it also increases risk, so it must be used cautiously.

Understanding the market’s behaviour and having a clear trading strategy based on market knowledge helps to make well-informed decisions quickly.

The most popular time frames for scalping

Scalping uses very short time frames to make fast decisions and execute trades. The following are the most popular time frames:

The 15-second time frameis not a popular time frame, but very skilled scalpers use it to make decisions and take advantage of tiny price swings.

The most popular and most important among scalping traders is the 1-minute time chart. During the trading session, traders might make a lot of trades and use 1-minute charts to monitor and react to quick price movements.

The 5-minute time frame offers the quick response needed for scalping, butis less detailed than 1-minute charts. This enables traders to track short-term price moves and act quickly.

The one-hour chart can provide helpful context, even though day traders mostly focus on shorter timeframes. They display important support and resistance levels in addition to general market patterns.

Some scalpers use tick charts, which show price movements based on a set number of trades rather than time intervals. A 100-tick chart, for instance, provides a more active view of price action by updating every 100 trades that are executed.

The best time of day to scalp the market

Market liquidity and volatility often determine the best time of day to scalp. The specific trading strategy used may also have an impact on the best time to scalp. The following are some general guidelines:

The first hour after market open

There is usually a lot of volume and high liquidity following the first hour after the market opens. This provides better opportunities for quick trade entry and exit.

As traders react to overnight news and economic reports, market open sessions are often very volatile. This increase in activity creates quick price swings that give scalpers opportunities for short-term trading.

The last hour before market close

Also the last hour before the market closes, when there is often more liquidity and volume, is a good time for scalping.

The last hour can also be volatile, as traders rush to modify or close positions,generating opportunities for short-term trading.

During major economic releases or news events

Keep in mind the scheduled release times, which are often in the morning for U.S. markets or during European trading hours. Prior to the release, these events can briefly reduce liquidity, which may be followed by rapid price changes.

Significant volatility

Also can be created by scheduled economic reports like Non-Farm Payrolls, CPI and major news events. Scalpers may be able to profit from quick price swings as a result of this price volatility.

High & low volume trading sessions

The overlap of major markets, like London and New York, offers higher liquidity and volatility. This creates favourable trading conditions for scalping, with more price movement and tighter spreads.

The best time for scalping can vary depending on the asset and the strategy. It’s important to adapt your trading approach by analysing market conditions and the movement of the asset at different times of the day.

Day trading

Day trading involves buying and selling financial instruments like stocks and forex within a single trading day. It doesn’t refer to a single strategy, instead it refers to a number of trading strategies that aim to open and close trades within the same day.

In order to capitalise on small price movements in highly liquid stocks or currencies, day traders also use high levels of leverage and short-term trading strategies.

Day traders aim to profit from short-term market volatility and stay in trades as long as possible, in contrast to scalpers. A popular technique they use is news-based trading. Scheduled events like economic reports, earnings, or interest rate decisions can cause sharp market moves if results are different to expectations. This can create big opportunities for day traders.

How does news affect day trading?

News has an impact on day trading by increasing volatility and causing quick price movements. Events like economic reports, earnings and geopolitical events can move markets fast and lead to rapid changes in asset prices. Day traders need to stay on top of news to react quickly, manage trades, and mitigate risk.

What is the role of liquidity in day trading?

Liquidity is essential in day trading because it enables traders to quickly enter and exit positions without affecting the asset’s price. High liquidity means lower trading costs, tighter spreads, and less slippage. By enabling execution close to target prices, adequate liquidity also makes it easier to execute large trades and manage risk more effectively.

Day trading or scalping?

Different strategies work for different traders. If you’re looking for more intense, quick movements, and don’t want to spend hours researching assets then you’ll probably prefer scalping. But if you prefer to take more time to consider your options, you’ll probably choose day trading.

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This information is not considered investment advice or an investment recommendation, but instead a marketing communication.