How to choose between scalping and swing trading

April 13, 2016 16:00

Dear Traders,

Like most trading choices, Forex scalping and swing trading are similar but distinctly different. The most obvious distinction is time related. Scalping in Forex is trading the markets intraday for minutes or hours, whereas swing trading strategies take at least a few hours and can last for several days.

Each trader will eventually develop a natural preference for one of the two, which depends partly on their trading personality. This post explains which characteristics favour Forex scalping over swing trading and vice versa.

What's your patience level?

Traders with patience or less time to monitor the charts, will be well aligned with swing trades that lasts more than 24 hours or even a week. These traders can apply a strict and disciplined approach each trading day they implement their trading rules. They have a remarkable adherence to plan the trade and trade the plan. Temporary fear will not distract their vision. However, Forex scalp trading might prove to be too high pace and require more flexibility plus adjustments than this trading character is comfortable with.

Traders with less patience or more monitoring time will lean more towards scalping in Forex. Scalping setups develop quickly and you exit them fairly fast too. Scalping traders are able to trade and handle multiple positions per trading day. Patience is not irrelevant for FX scalping but is certainly less important, whereas flexibility rises in significance.

What you put in vs. what you want out

Traders with larger trading accounts and smaller monthly profit targets, are typically better off with swing trade strategies or even long-term trading. Traders with smaller trading accounts and larger monthly profit targets, usually trade via scalping or short-term trading. In simple terms, scalping in Forex offers a higher frequency of trade setups than swing trading.

Are you more calculated or risk orientated?

A calculated person is often more suitable for swing trading techniques because he/she has the required discipline to neatly keep track of their open trade setups. This personality should also be able to reasonably clearly distinguish the original positions and their various trade plans. They are more likely to be introverts who fill in their evaluations and monitor their feedback accurately.

For a more calculation-focused trader, scalping could actually cause confusion because the trading style is often intense and heated. The higher number of entries, trade management and evaluations for scalping when compared to swing trading, could trigger frustration for the more calculation-orientated trader.

A risk taker is probably better off with scalping in Forex, because higher time frames could be perceived as boring and could lead to a sloppy approach. The more risk-orientated trader might need a touch of adrenaline to keep their trading game at the highest possible level.

Scalp traders are more likely to be extroverts, who will be less disciplined in tracking and evaluating, but better equipped to make tough calls during the heat of battle. Their flexibility allows them to be agile and quick on their feet.

Your trading personality decides

Forex scalping and swing trading are both plausible trading options, but the choice ultimately depends on who you are as a trader. For example, the high frequency of entering and exiting in scalping involves a high level of focus - so if you are easily distracted, it's not for you. The frequency of trades in Forex scalping, also requires higher transaction costs. Setups on higher time frames can also take days to develop, whereas short-term trading setups can mature within the hour and will be closed at the end of the day.

But it's important to be cautious, because we are all individuals and therefore nobody perfectly subscribes to either set of descriptions. The first step with deciding any strategy, is to test it on a demo account for a long enough period of time to understand if it fits you or not.

Do you have something to add about Forex scalping or swing trading? Feel free to do so in the comments section below.

Cheers and good trading,

Chris

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