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February 2, 2018

XM, Do you know what is the Difference between Swing Trading and Scalping?

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Swing trading involves carrying a position for more than 24 hours but not holding it long enough to the point where it bleeds over into trend trading.

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Leverage 1:1000 does not apply to client registered under the EU regulated entity of the Group. The maximum leverage for Trading Point of Financial Instruments is 30:1.

Recently, we hear the word “Swing Trading” very often.

The strategy itself seems like a Scalping, but there are certain differences between them.

Thus, rules and minds that you should have are also different.

Swing Trading Strategy

When a trend breaks within the Forex market, you’ll find that swing traders usually “get in the game”, as it were.

Trends tend to hit a conclusion with a certain degree of price volatility, with a new trend usually waiting in the wings to emerge.

What swing traders like to do is become active when the volatility hits, buying and selling while others are simply contemplating movements.

Swing trading involves carrying a position for more than 24 hours but not holding it long enough to the point where it bleeds over into trend trading.

Should you choose to adopt swing trading, what you do and the moves you make will be based upon a set of trading rules, which will be established through fundamental or technical analysis.

These rules (or algorithms) will help you identify when to buy and sell a currency.

What you’ll find is that the algorithm situated at the heart of swing trading doesn’t have to be exact in order to predict the peak or valley of a price move.

It simply needs the market to move either up or down in order to come into effect.

Looking at what risks await those who engage in swing trading, a range-bound or sideways market can prove detrimental.

Scalping Strategy

As a word within any other aspect of life, scalping brings on negative connotations, but that doesn’t apply in the world of Forex trading.

From a speed perspective, scalping easily ranks as one of the quickest Forex trading strategies around.

As the name suggests, scalping involves exploiting the price gaps created by order flows and bid/ask spreads.

Looking at the nature of scalping, you’re really going to have to be on your toes, as you are going to need to be making the spread or buying at the bid price, before selling at the ask price.

Out of this, you’ll be looking to profit from the difference between the two prices.

It’s all about moving at speed when it comes to scalping, as positions are only ahead for a short amount of time; risk is also minimized through such means, though, so that is another upside of adopting a scalping-based approach.

Those who choose to scalp won’t try to exploit large moves, nor will they trade in large volumes.

It’s all about small and often when it comes to scalping.

The level of profit that scalpers will generate per trade is small, so those adopting such a trading strategy will require liquid markets, as it will allow for increased trade frequency.

Unlike swing traders who are looking for a noisy, almost chaotic marketplace, scalpers prefer things to remain on the quiet side, as sudden price movements can really disrupt this way of Forex trading.

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