While both are short-term trading strategies, day trading and scalping differ in several ways and are not aimed at the same investor profiles.
The promise of large and rapid gains in short-term trading is attracting more and more individual traders. Of the leading short-term strategies, day trading and scalping are of particular interest. Often confused and misidentified, the two methods differ in many ways.
Here is a comprehensive summary of the information you need to choose the right short-term trading strategy for you.
Day trading is an investment method in which the trader opens and closes positions within the same day. Trades therefore last only a few minutes or hours and are all closed at the end of the day. The goal is to limit losses and have a positive balance at the end of the day. Target gains are 10 to 100 pips or points.
Scalping is an investment method based on making a large number of trades in a short period of time. Scalpers make dozens of trades a day, each of which may last only a few seconds. The investor's goal is to profit from the smallest price fluctuations in the financial markets. The profit target is 1 to 10 pips or points.
Day trading is particularly popular with non-professional investors. Although it is time consuming, positions can remain open for several hours and all risk is eliminated overnight, making this trading method a good complement to a full-time job. You’ll need technical analysis skills and up to date knowledge about the latest financial news in order to maximize your profits.
Scalping is more suitable for experienced traders. It requires total availability as well as a strong resistance to stress, because of the large number of operations carried out in a small amount of time. In addition, a large amount of capital is required to make it profitable. What’s more, scalping is widely used in algorithmic trading, and novice traders will find themselves competing with extremely fast, high-performance robots.
While day trading and scalping are both short-term trading strategies, the former seems to be more accessible to individuals and beginners, while the latter appears more suitable for experienced and even professional investors. They do not require the same capital, nor do they involve the same costs or psychological pressure.