Perhaps, you are a long-term investor or have been swing trading, and you want to focus on learning how to day trade in the financial markets. However, you are wondering if you should go with a strategy that consists of day trading vs scalping. This article will further discuss this topic to help you determine whether day trading or scalping is the right approach for you.
Day Trading Defined
Day trading occurs when an individual purchases a stock or other asset and sells the same stock or asset the same day. You can apply day trading to any form of market where assets can be traded, which includes (but is not limited to) the New York Stock Exchange (NYSE), the forex market, or the futures commodity market.
Of course, these markets open and close at various times in the day. However, for day trading, an asset is purchased and sold within a single trading session as defined by the specific market. Day trading aims to capitalize on a slight price movement that day.
Scalping is where a stock or asset is purchased and closed on the same day, like day trading. However, the trader takes advantage of a quick price movement, so the trader purchases and sells the equity within minutes.
With day trading, some traders may decide to buy and hold the stock for most of the day to capitalize on gains. Whereas, with scalping, a position is held for a few minutes before the trader closes it. Scalpers look for a minor price movement to make a quick gain.
Day Trading vs Scalping Benefits
There are several benefits of day trading over scalping that day traders can realize:
Day Trading Benefits
Day Trading offers:
- Less Stress Than Scalping
Some traders may agree that day trading can be stressful. However, they may also decide that scalping can be even more stressful because it requires that the trader get into a position and quickly exit once they have either reached their profit target or the stop loss.
So, the trader needs to be highly focused and have a quick entry and exit. This fast action can cause additional stress to some, which is why some choose day trading over scalping.
- Bigger Wins Over Scalping
Because positions can be held for hours when day trading, it can offer more gains over scalping for a single trade. Scalpers are usually in and out of a position in minutes.
- Fewer Trades Required
Scalping may require that multiple trades are made daily to capitalize on market movement. In day trading, the trader may not place as many trades as a scalper, since their gains per trade may be more significant than a typical scalper.
- Time on Your Side
Day traders have a larger stop loss to give their trades time to work in their favor. A scalp trader usually has a very tight stop loss and exits a trade immediately if it does not work in their favor.
- Higher Chart Timeframe
Day traders can trade from a 15-minute or higher chart time frame, depending on their strategy. Many scalpers trade from much lower time frames, like a 1-minute or 5-minute timeframe.
- Quicker Wins Over Day Trading
Scalping allows the trader to receive quicker wins and requires no need to wait hours for them to exit out of a trade.
- Quicker Market Movement
Scalping offers the ability to catch a quick move in the market and capitalize on that.
- Out of Market Quicker
Scalping offers the trader a quick entry and exits out of the market if they choose. They do not have to stay in the market for a long time. Being out of the market benefits day traders who have held a winning trade, which ended up reversing due to negative news or events.
- Be Correct for Just A Few Minutes
A scalp trader needs to only be correct in the market direction for a few minutes to capitalize on the movement. It can be easier to predict which way a stock will move (up or down) over a few minutes vs. where it will move over the entire day.
Which to Choose – Day Trading vs Scalping?
The answer to this question depends on your trading personality. There is no right or wrong answer to this. Some individuals can be successful as day traders and others as scalpers. Here are some questions to consider:
1. Are you okay with holding positions for 30 minutes or more? Or does this cause you anxiety to be in the market?
2. Are you a quick thinker and reactor? Can you immediately get into a position and get out of it in a few minutes or less?
3. Do you prefer to get quick wins? Or would you prefer waiting a little longer for your gains to be more?
4. How often do you like to place trades? Multiple times, or just a few times a day?
5. Do you enjoy adrenaline rushes? Are you at your highest when you take things a little slower?
6. Can you focus on a screen to watch price action, quickly entering and exiting trades within minutes? Or do you require a little more flexibility in day trading?
All of these questions should be considered when deciding to become a day trader vs a scalper. Note that anyone can learn how to be a day trader or a scalper.
But, if your personality lends itself to one over the other, it will be much easier for you to succeed in that area. For example, if you are the type of individual who likes to take time to make decisions, day trading may be the best approach for you. If you consider yourself a quick thinker and can make rapid decisions in your everyday life, then scalping may be the best for your personality.
Summary: Day Trading vs Scalping?
Day trading and scalping can provide financial opportunities to those looking for a way to make money outside their regular job. Your trading personality can dictate which trading style will work the best for you.
Before getting started, you must develop a day trading or scalping strategy that you feel confident in.
Looking to Learn
Maurice Kenny has helped over 600 people become financially free through one-on-one coaching, mentorship, and options trading strategy. Many of these new traders are now full-time traders, and they all started by watching his 1-hr webinar.
Feel free to check out other FREE educational resources to help guide you as you begin your new journey to financial freedom.
Also, download a (FREE E-BOOK) by Maurice Kenny, DAY TRADE LIKE A MILLIONAIRE.