Day Trading vs Scalping: Styles and Strategies Compared

Have you ever wondered why people compare day trading with scalping strategy? Why are crypto enthusiasts worldwide inquiring about trying out these popular strategies for their trading business? In the last few years, the attentiveness in Forex trading seems to be increasing, not only among the finance community but also among many beginners who are just making their first steps in this industry.

Forex trading has become one of the most popular online businesses because it is easy to start and does not require previous experience or a lot of money to invest. A motivated individual needs a good internet connection, $ 150 in the account, and basic knowledge of how technology works.

But before we give you an answer to the comparison of day trading vs scalping, let’s get acquainted with the most basic facts concerning Forex in general and what a quality Forex strategy means.

What is Forex trading exactly?

The term “Forex” is a word that originated from two words: “foreign” and “exchange”. Forex trading is selling one currency and buying another at the same time on the Forex market, which is open 5.5 days a week, 24 hours a day.

The reason for exchanging foreign currencies is mainly to profit, although people exchange currencies for commerce, trading, and tourism. The exchange, without exception, is done in pairs such as EUR/USD, USD/GBP, USD/JPY, AUD/CAD, etc.

The Forex market is, at the moment, the largest and most liquid decentralized financial market in the world, with an incredible $ 6.6 trillion daily turnover.

For transactions to take place successfully on Forex and generate profits, two things are crucial:

– Choosing a regulated and quality Forex broker

– Choosing the ideal Forex trading strategy

Trading strategy in Finance – explained to beginners.

In Finance, the term “trading strategy” refers to the fixed plan designed for traders to achieve profitable returns by going either short or long in markets.

What describes one quality trading strategy are the following:

• Quantifiability
• Consistency
• Verifiability
• Objectivity

Remember that the price at which a particular financial instrument is traded is usually determined by the supply and demand for that specific financial instrument.

Forex trading strategy – definition and explanation

In Forex, a trading strategy represents a forex trader’s technique to determine whether to sell or purchase a currency pair at any given time. Forex trading strategies are usually based on:

• Fundamental analysis includes the basic quantitative and qualitative information that will contribute to the economic or financial good of security, company, currency, and subsequent financial valuation.
• Technical analysis – A trading discipline that evaluates investments and identifies trading opportunities by analyzing volume and price movements.

A good trading strategy in Forex is usually made up of trading signals that are responsible for triggering action, either to sell or buy a particular security or some other asset that has been generated by analysis. Forex trading strategies are available online and are able to be developed even by Forex traders themselves.

So, what about day trading vs scalping trading? What secret lies behind this comparison? Let’s first explain both strategies separately, then compare them against each other, shall we?

Day trading strategy in Forex

Before getting to know all the essentials of day trading vs scalping, it’s time to learn the basics of each strategy. Forex day trading refers to a short-term trading strategy. The strategy focuses on buying and selling currency pairs within the same trading day.

Usually, day traders will place several forex trades per day, rather than holding overnight positions, and then close them out at the end of the trading day. With Forex day trading, traders are able to experience quick returns on investment.

It’s best suited for traders who spend a lot of time analyzing the markets and monitoring their trading charts within a day. This particular strategy involves reacting to short-term price fluctuations in the prices of currency pairs. For that reason, it’s necessary to have:

• Discipline
• Focus
• The ability to stick to a day trading strategy

For day trading strategies to work out, it’s crucial to use relevant drawing tools and technical indicators. It will help traders devise potential exit and entry points for their trades.

Scalping trading strategy in Forex

Scalping trading strategy in Forex refers to a short-term trading strategy in Forex that is focused on making profits out of small price movements in the Foreign exchange market. Scalping traders can buy and sell a particular foreign currency pair and hold an extended position that lasts a couple of seconds or a few minutes.

The process is repeated during the day to achieve frequent returns. It’s done so by taking advantage of price fluctuations. When it comes to the Forex market, another name for even the slightest price movement one particular currency can make is called “pip” – percentage in point. Traders use it for measuring losses and profits.

Keep in mind that Forex scalpers, most usually, aim for scalping between 5 to 10 pips from every position. The main goal is to make a more significant profit by the end of every day. Forex scalping, ultimately, represents a particular form of arbitrage trading.

Leveraged trading in scalping strategy

Some of the most effective forex scalping strategies include leveraged trading. Utilizing leverage in Forex means you’re dealing with a technique that enables all traders to borrow capital from a Forex broker. The main goal behind that is gaining additional exposure to the Foreign exchange market with a small percentage of the total asset value as a deposit.

A scalping strategy increases profits. However, it is also able to magnify losses in case the Forex market doesn’t move in the preferred direction of the bet. For that reason, Forex scalpers need to keep a constant eye and control the market to track any changes.

Get to know the essentials of day trading vs scalping.

What is crucial to remember in the first place is that scalping is a form of day trading. Therefore, it’s a crucial part of day trading strategy. So, now that you’ve got a clearer understanding of what scalping and day trading strategies represent, it’s time to do the famous “day trading vs scalping” comparison.

We’ll start by explaining what the main similarities of scalping trading vs day trading are.

Scalping vs Day trading Forex – similarities

To learn more about scalping vs day trading forex similarities, we’ve provided you with some critical indicators of their similarities.

• Both approaches do not believe in leaving trades open overnight. Instead of that, scalping and day trading believe that the overnight session presents substantial risks that can lead to significant losses.
• Also, when it comes to day trading vs scalping, scalping and day trading could be applied to all types of assets. These assets include stocks, currencies, bonds, and exchange-traded funds.
• Sometimes, day traders could rely on fundamental analysis and other valuable concepts. In scalping strategy, this type of analysis isn’t always necessary.

Forex scalping vs day trading – differences

Now that you’ve got all the essential information about the similarities of these two strategies, let’s know what scalping vs day trading differences are, shall we? As mentioned above, scalping is a form of day trading strategy.

For that reason, in this part of their differences, we will focus on differentiating the two by observing scalping vs day trading, which involves relatively longer timelines.

Their main difference is that, in scalping, Forex traders focus on proportionate short timeframes. A great majority of scalpers utilize short timeframes, up to 2 minutes. The average timeframe in general for numerous scalpers is less than 5 minutes.

On the other hand, day traders utilize short timeframes. For instance, these traders cannot use a four-hour chart since every bar in the chart represents four hours. For that particular reason and the fact that a day has six four-hour periods, it’s not logical to use such a period.

As a result, these traders also need to use relatively short timeframes, with a maximum of 30 minutes. Remember that different scalpers and day traders utilize numerous approaches for their scalp and day trade.

What are the most popular strategies you can use as a day trader?

As a day trader, there are several valuable strategies that you can consider using:

• Finding reversals – Traders are using indicators and several strategies to determine whether a particular reversal will happen or not. We advise you to look at candlestick patterns or other indicator reversals.
• Using the VWAP: It’s an indicator for the volume-weighted average price.
• Finding breakouts – In scalping, scalpers are looking for breakouts, which means identifying potential opportunities for gaining profits.
• Momentum trading – It is a strategy where traders focus on profiting in assets showing a strong momentum within a particular day.
• Finding continuations is a process opposite of reversals that includes identifying points of potential continuations.

Conclusion

It is obvious that, in the Forex trading world, day trading strategies are getting more and more attention among the traders globally. This is partly because of the strong performance of the financial market that drew people to try Forex trading.

What is crucial to remember regarding Forex trading is that it’s not rocket science. Almost anyone in this world can try their luck, practice their trading skills with a demo account of a reliable broker and then dive into the fantastic world of Forex.

Besides that, it doesn’t cost a fortune to get started! If you are motivated, persistent, and wise enough while choosing the perfect trading strategy, you should go for it and start making serious profits from Forex trading! Good luck!