Scalping vs Day Trading: What are the Differences

The world of financial markets can seem exciting from afar. You must have heard stories of someones friend or relative making big bucks from financial trading. 

Then one day, you decide to take the plunge into trading yourself only to have your mind boggled. 

Your friend may suggest you try day-trading an asset in Forex and earn good profits frequently. The other self-proclaimed financial expert may suggest you scalp daily profits.

Both sound convincing but which one should you go for？ 

While both approaches involve buying and selling securities in a short period of time, they do differ in their objectives and methods. 

In this blog, we‘ll educate you on the differences between scalping and day trading. By the end, we hope you’ll be able to decide which strategy is right for you. 

So, let's dive in and explore the nuances of scalping versus day trading!

Differences between Scalping and Day Trading

• Asset holding times of scalpers and day traders differ

Scalping and day trading are two different approaches to buying and selling assets like currencies and other financial assets. 

The number one difference between the two is the holding time for each trade. 

For example, scalpers hold their trades for only a few seconds or minutes, and try to make small profits on each trade. 

A scalpers main focus is to buy and sell quickly and take advantage of small price movements. Furthermore, scalpers need to be quick and alert to make profits successfully.

Day traders, on the other hand, hold their trades longer, usually a few hours and make larger profits on each trade. They use different tools such as technical indicators and chart patterns to grab buying and selling opportunities. 

Moreover, Day traders have a specific profit target and stop loss in mind before entering a trade.

Scalpers and day traders also have different ways of managing risk. 

Scalpers aim to make multiple small profits during the day, so they need to have a high win rate. However, if they don't manage their risk properly, they can lose a lot of money. 

Day traders aim to make larger profits on fewer trades, so they have a lower win rate but a lower risk of losing money.

• Different Profit Targets and Risk Management 



Scalping and day trading also differ in how they manage profits and risks.

Scalpers focus on making small profits on each trade, but they aim to do it frequently throughout the day. Scalpers also have a very high risk to reward ratio, often risking more than they stand to gain on each trade. For example, a scalper may risk $10 to make a profit of just $1.

Day traders on the other hand, aim to make larger profits on each trade, but by trading less frequently. Day traders usually have a lower risk to reward ratio than scalpers, as they aim to make larger profits from each trade. For example, a day trader may risk $100 to make a profit of $500.

• Varying Trading Frequency



Scalpers and day traders have different approaches to how often they trade. 

Scalpers are like busy bees who make trades all day long, while day traders are more like patient hunters who wait for the right moment to make a trade.

Scalping is a fast-paced trading style requiring constant attention to the market and a high tolerance for stress. It's like being in a race where every second counts. 

On the other hand, day traders are more laid back and wait for the right opportunity to present itself. They know that patience is key to success in the market.

• Required Capital and Margin varies



Since scalpers aim to make small profits on each trade, they need a larger account size and more margin to make a decent return on their investment. 

Day traders, on the other hand, can make a decent return with a smaller account size and less margin. This makes day trading a more accessible option for beginner traders.

Scalpers need to have enough capital and margin to cover their losses if a trade goes against them, as well as enough capital to make a reasonable profit on their winning trades. 

Meanwhile, day traders can often get by with less capital and margin because theyre aiming for larger profits on each trade.

• Unique Trading Styles and Mindset



Finally, scalping and day trading require different trading styles and mindsets. 

Scalpers need to be quick, decisive, and able to manage risk in a fast-paced environment. Moreover, they must be able to make split-second decisions based on market movements and news events.

While day traders need to be patient, analytical, and able to make sound decisions based on market trends and indicators. 

They must be able to identify potential entry and exit points, as well as manage their risk using stop losses and profit targets. 

Scalping vs Day Trading: Which ones better？

Scalping and day trading are two popular trading strategies in the financial markets, but they differ in several ways. 

In this section, well compare scalping and day trading to check whether one is better than the other.

• Win Rate

Scalping → Higher win rate, lower profit

Scalping offers a higher win rate because traders take advantage of small price movements. By entering and exiting trades quickly, scalpers aim to capture small profits, which can add up throughout the day, resulting in a high overall win rate. 

Day Trading → Lower win rate, higher profit

In contrast, day trading offers lower win rate because traders hold positions for a longer period of time, which makes them more exposed to market volatility.

• Quick Profits

Scalping → Smaller Profits, Faster Accumulation

Scalpers aim to make small profits on each trade, but they do this frequently throughout the day, which can add up quickly. 

By entering and exiting trades quickly, scalpers can quickly accumulate profits. 

This can be an attractive strategy for traders who want to see quick results and have a high tolerance for risk. 

Day traders → Larger Profits, Slower Accumulation

In contrast, day traders may have to wait longer to see significant profits.

• Less Exposure to Market Risk

Scalpers → Smaller Positions, Less Market Risk 

Because scalpers hold positions for a shorter period of time, theyre less exposed to market risk, which can be beneficial in volatile markets. 

Scalpers are also less likely to be affected by major news events that cause significant price movements in the market. 

Day Traders → Larger Positions, More Holding Period, Greater Market Risk

In contrast, day traders may be more exposed to market risk because they are holding positions for a longer period of time.

Final Takeaway

In conclusion, scalping and day trading are two different trading strategies with distinct features, advantages, and disadvantages. 

Scalping requires traders to make quick decisions and take advantage of small price movements, while day trading involves holding positions for longer periods of time, usually one day. 

Its important to understand the differences between these strategies and choose the one that best suits your trading style and goals.

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Discover the key distinctions between scalping and day trading to master trading. Decode both strategies, risks, and potential rewards in this fast paced guide.