Is swing trading better than scalping? Or is day trading the best way to attack the markets? What's the difference?
What's most profitable? Let's discuss!
Now, the most common question that I get asked by aspiring traders when they meet me for the first time is
what trade approach is most profitable? Do
scalpers make more money than day traders? Is swing trading more profitable than day trading?
Basically, the answer is there's no one answer that fits all.
It does indeed, depend on a number of factors and based on personal
circumstances, trading objectives, and the like. And
maybe not as obvious, but one of the other important factors that you should consider is your personality traits
Because after all a lot of trading come down comes down to
psychology.
Now, let's first of all, define what the different approaches are.
First of all, you've got day trading. Now, the way I describe day trading is
someone that sits in front of his computer for several hours a day,
looking to enter and exit trades within that calendar day.
Now, that of course doesn't mean that he will never hold trades overnight. Sure, of course he will
but he generally doesn't. He generally, closes them out within the calendar day
Now, to be a day trader. What it means is you need to be working it around your day job. Certainly, when you are starting out.
But there are of course, many aspiring traders that simply have time on their hands
during the day. To be able to trade you could be retired or you could in fact , you've given up your day job
to embark on this a new trading career.
But generally speaking, a day trader has five six-seven hours a day
n order to analyze the charts looking for trade opportunities
that may appear several times a day. A swing trader on the other hand, is looking for longer term trades
generally on the higher time frame charts.
Now swing traders can be anything from a couple of days to a number of weeks.
Now, you can be a short-term swing trader in which case you'll be looking at maybe two to five days
but generally less than the way a
medium termed swing trader
can be anything from a week out to a month and a long term swing trader. Now, that could be measured in terms
of weeks and indeed months.
Now, at the other end of the spectrum
You've got the investor, and these of course are looking into months and indeed years or very broadly speaking of course
Now at the tighter end of the scale you've got the scalper which is very time-sensitive
typically you may be in a trade for a matter of minutes or indeed just a few seconds as
The scalper name implies you're looking to scalp out small tiny chunks of profits
multiple times a day
Having multiple trades as they hoping to have more winners of course than losers
So which approach is more profitable
Well, let's first look at the scalper now. It's a very popular form of trading partly because of the fill factor
Especially in the forex market where it's so easy to enter
And exit the trades so easy to set up a trading account with a very small amount of money
Now a person with a day job that has just a few hours a day limited time to spend in front of the screens
May be attracted to scalping
Because the potential for profits and indeed losses they can happen very very quickly and if you're limited for the time
In front of the screens then this could be an attraction for you scalpers will generally risk just a small percentage
Amounts of the account so that no one trade will affect them adversely
But for the small risk the gains are equally small on each trade, but the intention
Clearly is to have more winners than losers
Now for gamblers the natural reaction when they're losing is to fight a losing streak with
Bigger risk on the next trade and this can cause huge problems in your trading
So you've got to make sure that if you're going into the scalping methodology
then you don't have these gambling traits a trader that comes into trading for the first time and
Starts off with the scalping approach will generally have that gambling
tendency which can be indeed very dangerous
Brokers generally love rookie and aspiring traders that elect the scalping approach when they first start off
Why well because most of them do end up blowing up their
$500,000 trading accounts and in the meantime or paying the broker lots of commission for the joy of doing that
Why is it? Do you think that most of these brokers will offer huge bonuses to get you into trading in the first place?
Why is it that they offer huge huge leverage well?
I'll tell you why they do is because they know that the majority of guys that come in and guys and girls that come in
To trading for the first time using the scalping approach will end up blowing their account now
Don't get me wrong on this okay, because there are some very very successful
Manual scalpers out there, and I know quite a few
However, I think it's fair to say that it's not advisable to start your training journey as a scalper things can happen very
Very quickly you've got to be able to react very very fast the multiple adrenaline highs and the lows
Can be very hard to deal with and you need to have experience
So that you know how your emotions will react in these conditions
To be a successful scalper you need to be extremely disciplined
Okay, you need to be able to control your emotions
And the adrenaline rush is that this trading does indeed provides. Now, indeed if you are one of these people
That can control your emotions control the discipline
and you can handle these adrenaline rushes then indeed you could possibly make a very good living out of scrapping,
if you know what you're doing
Personally for me. I find it just way way too stressful, and maybe it's an age thing
But certainly in my earlier days when I was trading in the pits in the pits of London
You know we were basically scalping and it made many traders
Multi millionaires at a very early age some lost a lot and indeed some actually even lost their hair
Then you have swing trading now, this is trading at a much slower pace
Traders are able to do their
analysis in a short period of time perhaps at the end of the day or even in their lunch break whenever work permits
It's great for those that just have maybe 10 20 30 minutes indeed to spend in front of the charts
They analyze the markets and they place their trades possibly with a pending order that's basically waiting for the market that come to them in
order to execute
Very analysis is over a longer period of time after all they may be in the trade
For a few days or indeed weeks the emotions and stress of a swing trader is
Considerably less than a scalper and remember most traders that lose
Lose because of the emotions that get the better of them not the fact that they call the market wrong in the first place
Now the price action signals are also debatably more accurate over the longer time period projections as well
now if you want to trade fundamentals fundamentals play out much bigger on the longer time periods
so if you're using fundamentals and technicals
Sometimes a swing trading approach can be much much more powerful than a scalping approach now a swing trader may risk
0.5 or one or even two percent of the account on each trade
But because less trade will be taken so the chances of a complete wipeout
Are also going to be lessened by the fact that you're trading less?
Using 2% as a scalper could be disastrous. Let's face it
You could easily have 10 trades on the bounce as losers that will put your count down
20% as a scalper that means you've got to make
25% just to get back to break-even
Now in the middle we have the day trader. That's basically what I do
Well, I do a mixture of day trading and swing trading
So I'm able to spend multiple hours in the working day analyzing the markets
Looking for the high probability trade setups looking at the 15-minute chart
One-hour chart the four-hour charts, you know I have time to sit and wait for the trades now
If none come along doesn't bother me. I know there will be some trades coming down the line in the future
We don't force trades as a day trader because we have time on our hands
You know we hadn't we're not limited just an hour a day. We've got plenty of time to analyze the markets
We are patient traders
We may be risking a quarter of a percent or higher percent on each trade no
And we may just have a few trades in the day, maybe some days
We won't have any trades at all
But the emotions again a lot less than they are with a scalper
I know I can handle the discipline and the emotions of day trading
Much greater than I can if I'm in and out of the market on a dime
For signals using the high timeframes such as the one hour the four hour can be quite powerful if you know what you're looking for
It stands to reason that the less trade you take the less stress. You'll be putting yourself under
However one of the biggest problems that I've found over the years is that many that come into trading?
for the first time
They have a limited amount of time on their hands
Maybe a couple of hours a day so they start off by day trading and they're gonna get themselves
Frustrated because the trades aren't coming their way and they take trades that are simply not there which can often and more than likely
lead to losses in the trading account
so if you're embarking on a trading career and deciding which approach you are more likely and best suited I
Would say you've got to analyze firstly the time permitted that you can spend in front of the trading screens
then you've got to look at your personality how disciplined and
Emotional are you?
You need to consider your
Objections, what are you coming into trading for are you coming in for a bit of fun?
Are you coming in to supplement new income are you coming into this to eventually give up your day job or trade?
Full-time as a professional trader
So all these considerations must be taken into account when you're considering which trading style to adopt
My advice is this quite frankly
if you're an aspiring
trader coming into trading for the first time
You start on the much much higher time frames the swing trading approach if you're starting on the swing trading approach
You're not gonna
Let the emotions affect you as they do with most traders and emotions or the killer of most traders believe me
So start on the higher time frames and as you get proficient, then you may work yourself down to the lower timeframes
Scalping is great for those that have the high temperament the high
Discipline approach but for most of us out there that I think is few and far between
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To my next video good luck with your trading speak to you soon