When it comes to trading, there are three main strategies that you can use: scalping, swing trading, and day trading. But what are the differences between scalping vs swing trading vs day trading? 

Each one has its own advantages and disadvantages, so it's important to understand what each one is before deciding which one is right for you. 

In this article, we will discuss the differences between scalping, swing trading, and day trading so that you can make an informed decision about which strategy is best for you. 

What is scalping? 

Scalping is a trading strategy that involves buying and selling securities at very short time intervals, usually within minutes. The purpose of scalping is to make small profits while holding the position for a very short period. 

Scalping stocks is different from day trading and swing trading because it requires more frequent trading and a higher level of discipline. 

Example of scalping 

You buy 10 shares of XYZ stock at $100 for a total of $1000. You then sell them at $101 a few minutes later. In this example, you would have made a profit of $0.01 per share, or $10 profit in total. 

With scalping, you are holding a position for a few seconds or minutes and then getting out. You are also only looking for a few cents in a price increase rather than significant percentage gains. 

What is swing trading? 

Swing trading is a type of trading that attempts to capture short-term gains in a stock. Swing traders look for stocks with prices that are moving up or down, and they aim to ride the momentum of those movements. 

They differ from scalping and day trading in that they don’t aim to profit from small changes in the stock price. Instead, they hold their positions for a while, hoping to profit from larger price swings. 

Example of swing trading 

You buy 10 shares of XYZ stock at $100 and sell them at $105 a week later. In this case, you would have made a profit of $0.05 per share, or $50 in total. 

This example shows how you can make a larger profit by being more patient while trading. 

What is day trading? 

Day trading is a short-term trading strategy where you buy and sell stocks within the same day. You make your profit by taking advantage of small price changes in the stock market. 

Another way to describe day trading is “intraday trading”, which means you will complete all your trades within the same day. 

Example of day trading 

You buy 10 shares of XYZ at $100 when the market opens. The stock price rises to $101 by the end of the trading day, so you sell your shares. In this case, you would have made a profit of $0.01 per share, or $10 in total. 

Advantages and disadvantages of scalping 

What are the advantages of scalping?

There are a few advantages to scalping that make it a popular strategy. The first is that it’s a relatively easy strategy to implement. All you need is a computer and an internet connection, and you can start scalping right away. 

Another advantage of scalping is that it doesn’t require a large capital investment. You can start trading with just a few hundred dollars, which makes it accessible to many people. It also requires less research on the company and the stock market. 

When you’re scalping, you don’t need to know much about the company or the stock market in general. All you need to know is how to read a stock chart and place your trades. Lastly, scalping is a great way to get started in the world of trading. 

It’s a simple strategy that can be learned quickly, and it will give you a good foundation for more complex strategies. 

What are the disadvantages of scalping? 

The main disadvantage of scalping is that it’s a high-stress activity. You have to be constantly monitoring the market and making split-second decisions. This can be very difficult for some people, and it can lead to burnout. 

Another disadvantage of scalping is that it’s a risky strategy. Because you’re holding your position for such a short period, you’re more likely to experience losses. You can lower your potential for large losses by using stop orders. 

However, in a fast-paced environment, it is possible to forget to place a stop order, which can lead to devastating consequences. Commission fees are also higher with scalping since you’re making more trades. 

This can eat into your profits, and it’s something that you need to take into account when you’re scalping. Scalpers may also need to use more advanced software that shows real-time data to make informed decisions. 

This can add to the costs of scalping, and it may not be feasible for everyone. Finally, scalping can be difficult to stick with. The constant monitoring and decision-making can be tedious, and some people may find it hard to stick with the strategy for a long period. 

Advantages and disadvantages of swing trading

What are the advantages of swing trading?  

Swing trading has a few advantages over other types of trading. One is that it can be done part-time. You don’t need to quit your job and become a full-time trader to swing trade. Another advantage of swing trading is that it doesn’t require constant monitoring as day trading does. 

You can place your trades and then go about your day, without having to worry about the market. Real-time data is not as important for this style of trading and fees can be lower than day trading and scalping. 

This is because you’re not making as many trades, so you don’t have to pay commission fees as often. Real-time data can still be helpful, but it’s not necessary, which can lower your costs. Lastly, swing trading is a good way to diversify your portfolio. 

If you only invest in stocks, you are putting all your eggs in one basket. But if you swing trade, you can trade multiple stocks and even different asset classes like forex or futures. This will help to reduce your overall risk. 

What are the disadvantages of swing trading? 

The main disadvantage of swing trading is that it can take a while to see results. This is because you’re holding your positions for days or even weeks at a time. And, even though you may be making more money per trade than with scalping, it can take longer to reach your goals. 

Another disadvantage of swing trading is that you need to have a good understanding of technical analysis. This is because you’re looking for specific patterns in the charts to place your trades. If you don’t know what you’re doing, it’s easy to make bad decisions that can lead to losses. 

Fundamental analysis is also important because you need to know the underlying reasons why a stock is moving to make informed decisions. This can be difficult for some people, and it takes time to learn. You also need to be patient when swing trading. 

You can’t expect to make a profit on every trade, and you need to be okay with waiting for the right opportunity. This can be difficult for some people, especially if they’re used to the faster pace of scalping. Swing trading can also be risky. 

Because you’re holding your positions for a longer period, you’re exposed to more potential risks that shorter-term traders are not bothered by. 

For example, if you buy a stock on a Monday and there is a financial report being released on Friday, the report could negatively impact the stock. This can cause you to be stuck with a loss. 

Advantages and disadvantages of day trading 

What are the advantages of day trading?

With day trading, you can take advantage of the fact that the stock market is open for a longer period of time. This allows you to place more trades and potentially make more money. 

Another advantage of day trading is that you can be engaged in the stock market without having to worry about the split-second timing that is required for other strategies like scalping. 

Day trading is the 'goldilocks' when it comes to these three strategies. This is because it has the potential to make more money than swing trading, but it doesn't require as much time or effort as scalping. Lastly, day trading is a good way to learn about different companies and industries. 

When you’re constantly buying and selling stocks, you quickly learn about how they work and what affects their prices. This knowledge can be helpful even if you don’t continue day trading in the future. 

What are the disadvantages of day trading? 

The main disadvantage of day trading is the amount of commission you have to pay. This can eat into your profits, especially if you're only making a small profit on each trade. Taxes are also a consideration, as day traders have to pay both income tax and capital gains tax. 

It's also important to be aware that the stock market is not a zero-sum game. This means that for every winner, there has to be a loser. So, if you're planning on day trading, you need to be prepared to lose money as well as make money. 

Another disadvantage of day trading is that it's very stressful and time-consuming. You have to sit in front of your computer all day and watch the markets move. 

Day traders can avoid being glued to their trading desk by placing orders at the start of the day and have sell orders when the stock reaches a certain price. However, it can be difficult to go about your day when you are thinking about your positions, and checking your stocks all day. This can take its toll after a while.

Scalping vs Swing Trading vs Day Trading: Final Verdict

Now that we’ve looked at the different types of trading, let’s see which one might be right for you. If you’re looking to make quick profits and don’t mind paying higher commission fees, scalping might be right for you. 

However, it is important to note that scalping can be very stressful and may not be suitable for everyone. Swing trading is a good option if you’re looking to hold your positions for a few days or weeks. It can also be less stressful than scalping, but it does require more patience and discipline. 

Finally, day trading is suited for people who are okay with taking on more risk and who are comfortable with the stress that comes with it. It’s also important to note that day trading is only suitable for people who have a good understanding of the markets and know what they’re doing. 

So, which type of trading is right for you? 

It really depends on your goals, personality, and risk tolerance. By having a strong sense of self-awareness, you’ll be able to make the best decision for you. If neither of these strategies suits you, you can also try other forms of investing. 

For example, you could take a passive portfolio approach and invest in mutual funds, index funds, or ETFs. These are all good options if you’re looking to invest for the long term. Picking individual stocks is also a great way to grow your wealth. 

Feel free to read the other articles on this site to learn more about these options. No matter what route you decide to take, remember to always do your research and never invest more than you can afford to lose. We hope this article helped clear up some of the confusion around scalping, swing trading, and day trading.