From the March 01, 2011 issue of Futures Magazine • Subscribe!

To scalp or swing trade? That is the question

There is a good amount of debate among active day-traders regarding the pros and cons of scalping vs. swing trading. Even when considering a single session of trading, there are significant differences in approach and style between a scalper and a swing trader.

In the case of the S&P 500 E-mini contract (ES), some day-trading proponents encourage a single-session goal of as little as two points profit, with profitability targets achieved by increasing the total number of contracts used per trade. Here, the sentiment is that the day-trading endeavor is so difficult that taking a certain two points is the more feasible route to profitability.

"Scalping shorts" (below) shows a typical scalping regime: When the 20-period exponential moving average indicates a trend change off session highs, local retracement short entries are made. A scalping mentality may follow the trend, but seeks to book profits quickly with every trade.

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"Scalping shorts" is a 764-tick chart; the price bars are completed after 764 unique trades. Tick charts generate price bars based on market activity; more trades mean more bars. Some traders, especially scalpers, find the time distortion and increased activity unacceptable, but tick charts can allow the user to "see inside" fixed time bars, and often technical indicators are more responsive with tick-based bars.

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