Scalp trading versus swing trading

As a trader, there are many strategies one can deploy to make profits in the market. Unlike investors, traders are looking for quick profits in the market over a short period of time. 

Two of the most popular strategies are swing trading and scalp trading. Each of these methods is deployed based on the trader’s patience, flexibility, capital, and risk level. 

As everyone differs in their trading strategies, always do your own research before investing any money in investment products. 

Scalping as a strategy 

Scalpers aims for quick profits by leveraging on small price movements. By following short period charts like one-minute or five-minute charts, scalpers study these price movements and decide when to take trades. 

Ensuring that the market has liquidity is also a crucial factor because without liquidity, traders might lose out on trades due to the nature of scalping, by using high-frequency trading to gain profits. 

And with high-frequency trading, traders will also have to take into account trading fees that might greatly reduce their profit margin. Exchanges with low trading fees tend to be much more beneficial for scalpers. 

Scalping is best suited for traders with low patience, the ability to act swiftly, flexibility in their plans, and time to commit to focusing on the market. With less patience, scalpers can close trades quickly upon hitting a profit margin, and they are not afraid to switch courses if the trade goes sideways. 

Swing trading 

Similar to scalping, swing trading relies on identifying trends in the market but uses a longer time frame (usually daily to weekly charts) as a source of their information. 

Swing traders will seek out market signals like consolidation or corrections, and buy these investments just before they start to rise. Upon any price increase, closing the position gains them the margins between the buy and sell prices. 

For example, if the prices of a cryptocurrency start to correct, traders can start buying into the crypto and holding them for a while. When prices start to pick up, they can close the position and realize the profits. 

However, if the prices are still going downwards during a correction or consolidation, a short position can be opened to sell high and buy low. 

For swing trading, the timeline for these trades could be open for days, weeks and sometimes even months, depending on the trend. With catalysts like upcoming news or releases, these provide strong signals for traders to decide if holding for more profits or taking profit now would be a better option. 

Swing trading requires patience as trades typically take a long time and often, traders have to study technical indicators and chart patterns like Fibonacci extensions, support and resistance, Ichigomochi Cloud and moving averages before making a move in the market. 

With fewer trades being done as compared to scalping, swing traders are also able to keep transaction fees low. 

Swing trading works well for traders who are unable to devote time to the market, but are able to devote time to studying long-term trends, have more patience, and strategize carefully before making a move.

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