The world of investing is broken down into many parts and as a new investor it can be challenging to get started. There are many paths including different markets, strategies and investment styles. In this case, we’re talking about two specific styles of trading the Forex market — scalping and swing trading.
Scalping
Scalping is a strategy that targets small market movements to build maximum profits in a short timeframe. This is achieved by entering and exiting the market, taking profit from small price changes.
Benefits and challenges of scalping
Scalping is a fast players game. This strategy involves getting in and out positions on a consistent basis.
Benefits:
Positions are typically held for a short period of time, making for a swift transaction.
Because trades are made much faster, it can curb major losses.
It’s clean and simple allowing for a lower chance for the market to reverse.
Requires less analysis time and shorter time frames (5-15 minutes).
Investors can utilize indicators to seek out movements on the fly.
Challenges:
Requires discipline and focus to make quick decisions to spot multiple opportunities in the market.
Not the best strategy for beginners due to the amount of monitoring and speed of trading involved.
There are some brokers that do not allow scalping on their platforms.
Because there are so many trades placed in a given day or time frame, one loss can wipe out previous gains.
Swing Trading
Swing trading is a style of trading as positions are held for longer than a day. Trades are held within a day to several weeks based on fundamental market analysis.
Benefits and challenges of swing trading
Swing trading is a very popular method of trading for many levels of investors.
Benefits:
Because it is a technical strategy, there are clear and defined boundaries creating less risk at times.
Going into the market every couple of days makes it easier to identify more opportunities.
Often times, stop losses are smaller than long term trades allowing placement of larger sized positions.
