What Is the Difference Between Scalping Trading and Swing Trading?

Introduction

People who are participants in the Crypto exchange can be divided into two groups, investors and traders. An investor tends to hold the cryptocurrencies in long term, while traders through purchase and sell cryptocurrencies to gain profits in short term. In this article, we will discuss the most popular trading strategies: scalping trading and swing trading.

What Is Scalping in Cryptocurrency?

In general, scalping is a trading strategy of the stock market, but it is also applicable to the crypto market. It targets minor changes in intra-day cryptocurrency price movement, frequently entering and exiting to build profits. Scalpers aim to gains small profit each time from small price changes over and over again instead of a one-time massive profit target. They place many trades over short periods, as a result, by accumulating these small gains, the profits will add up over time to a significant amount.

Scalpers usually follow short period charts, such as 5-minute charts, 15-minute charts, study price movement on transaction-based tick charts. They focus on some news or fundamental event which may result in high volume and good liquidity. Scalpers can step in and generate profits off the increased volatility. Those who can handle stress, make quick decisions may tend to take this trading strategy. Scalpers also need to devote time to the markets, stay focused, and act swiftly.

How Do Scalpers Make Money?

Scalpers mainly make money based on the following factors:

• Trade the hot coins each day based on the watch list you create
• Buy at breakouts and see an instant move up after entry
• Sell quickly if there is no move up
• As soon as you have a small profit, sell half and adjust exit to your entry point on the remaining position, ensuring a high % of accuracy
• Take 3-5 trades until the daily goal has been achieved

In order to make an accurate decision, they will consider some technical factors, such as trading volume, price action, support and resistance levels, candlestick chart patterns. The technical indicators such as the Relative Strength Index (RSI), Bollinger Bands, the VWAP, and the Fibonacci retracement tool are used to assist scalpers to study the crypto market change. Some scalpers even use high-frequency trading bots to process a lot of data quickly.

What Is Swing Trading?

Also, swing trading is a trading strategy original in the stock market but applicable to the crypto market. Swing traders would pick some strongly trending coins, try to capture the price moves within a short time (several days or weeks), follow the strong trend to gain some profit then exit before the prices become stable. With such buying and selling methods, swing traders repeat to reap gains.

In cases wherein coins fall through support, traders move to the other side, going short. In general, swing traders are trend followers, if there is an uptrend, they go long, and if the overall trend is towards the downside, they could go short.

How Do Swing Traders Make Money?

Swing traders will gain a lot if there's a strong trend on a higher time frame, however, they may difficult to gain any profit in a consolidating market. They use technical analysis and charts which display price actions, helping them locate the best points of entry and exit for profitable trades.

Fibonacci extensions are occasionally combined with other patterns and technical indicators, such as Relative Strength Index (RSI), Bollinger Band, etc., which are widely used by swing traders to identity the coin price trades.

As for the swing traders, they pay more attention to a higher time frame, since a strong uptrend or downtrend are needed to be confirmed over a period of time. So the most important time frame for swing trading is likely the daily chart.

Scalping Trading V.S Swing Trading

The table below gives a brief comparison of the main differences between the two trading styles.

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