Scalping trading refers to a trading style in which a forex trader opens and closes a trade within a few seconds or minutes to get small profits. In scalping trading, the frequency of trades high, and profits are small. A trader who trades with a scalping trading style is called a scalper.
For example, opening and closing trades frequently to gain 2 to 3 pips. in this way, a scalper opens a lot of positions in a day to convert many small profits into a big one. Any timeframe less than 5 min is used for scalping trading.
There are many limitations of scalping trading.
- You can only trade major currency pairs because of their tight spread. Other currency pairs have a wide bid and ask price range so it will be difficult t0 do scalping on such types of currency pairs. I will recommend IC markets broker which offers zero spread accounts, especially for scalpers.
- A good internet connection is also required because a smaller delay in execution can turn a winning trade into a losing one.
Most traders believe that scalping is the riskiest style of trading, but I think risk is always in your control.
Day trading refers to a trading style in which a forex trader opens a trade at the start of the day and closes before the closing of the daily candlestick. A trader who trades with a day trading style is called a day trader.
A day trade does not like to keep positions open overnight. He will close all positions before daily closing either in loss or in profit.
Because when a daily candlestick will close then spread will increase from 2-3 pips to 8-15 pips (depends on forex broker) and a day trader is also looking for few pips with a tight stop loss, so there are many chances that spread will cover up your profits. This is also a reason that they close their positions before daily closing.
If you do not have the time to analyze your position throughout the day, then day trading is not for you. You should go for swing trading style.
Scalping vs day trading
There are few differences between scalping and day trading.
The difference in timeframe is a major difference in scalping vs day trading. A scalper trades in a very short time interval from seconds to few minutes. To make it clearer, any timeframe less than 5 minutes is used by a scalper.
On the other hand, a day trader trades in long time intervals from minutes to hours. Like 15 min, 30 min, and 1-hour timeframe. But both scalper and day trader close their positions before daily closing.
For scalping, you need a high leverage account. Because lot size will increase when the number of pips will decrease for a fixed amount of money. Like 1:1000 or 1:2000 leverage size is for scalpers.
For day trading, you need an average leverage size like 1:100 to 1:500.
Order Execution time
For scalping, you can not compromise on order execution timing. You need a high-quality internet connection with low ping to decrease order execution timing. Because a minor delay can cause bigger losses.
For day trading, order execution delay can be compromised because of higher timeframe and small lot sizes.
Zero spread broker
For scalping, you need a zero-spread broker. Icmarkets raw spread account is best for scalping. You can also trade on major currency pairs only. But in day trading, you can trade both major and minor currency pairs.
Keep in mind all the four parameters while selecting a trading style either scalping or day trading. Both trading styles are the best. Choose a trading style that suits your temperament and few conditions explained above.
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Note: All the viewpoints here are according to the rules of technical analysis and for educational purposes only. we are not responsible for any type of loss in forex trading.