Scalping vs Day Trading

Earlier this week we’ve discussed about what could be described as long-term trading styles (swing trading and position trading). In this occasion, we’ll be focusing on the other side of the story, short-term trading styles. Yes, we are talking about scalp and day trading.

Day Trading

It is quite intuitive, right? Day trading refers to a style of trading in which positions are mostly opened and closed on a same day. In other words, there is no overnight trading. The idea is to define a target that can be reached during working hours, before going bed.

Following that line of thought, one could imagine the number of trades a day trader typically opens is higher than a swing or position trader. Again, that is absolutely right.

As targets will be closer to the current quotes, one should open a larger quantity of trades to make substantial profits without risking too much on a single position. It is important to note that as spreads are tighter, volume plays an important role when it comes to profitable trading.

Day traders would usually rely on technical analysis more than fundamentals. Again, we still suggesting using both types of analysis. But the kind of short moves in price day traders are looking for are mostly triggered by technical factors rather than monetary policy decisions.

A day trader will also keep an eye on the economic agenda. Trading specific high-impact reports such as US nonfarm payrolls, gross domestic product, consumer price indexes is a common practice among them. These are all seen as great volatility boosters.

The only way to approach day trading and even scalp trading is on full-time basis. Any interruptions in the technology chain could seriously cost you thousands. Keep eyes wide open.

Scalp Trading

Scalpers work very fast, very frequently and yes, very much. However, profits are small and that’s why high-level activity is required to build serious gains. In order to apply this kind of trading style, it is necessary to count on the lowest commissions possible.

A scalper would target very close targets. Positions can last seconds to minutes. No more. Risk is high, stress is high, but again, you can have a good night sleep afterwards. This style might not be your best choice if you are just beginning in this industry.

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