Difference Between Spreads in Scalping and Normal Trading Strategy
Basis |
Spreads in Scalping |
Normal Trading Strategy |
---|---|---|
Holding Period |
Trades are held for very short duration here, typically ranging from seconds to minutes. |
In contrast, normal trading strategy involve holding positions for longer periods, which can range from hours to days or even weeks. |
Frequency of Trade |
Scalpers execute a high volume of trades throughout the trading session, sometimes entering and exiting positions dozens or even hundreds of times per day. |
Traders employing normal trading strategies execute fewer trades compared to scalpers. |
Profit Target |
Scalpers aim to secure small profits from each individual trade. |
Traders using normal trading strategies target larger profits per trade. |
Spread Impact |
Due to the high frequency of trades in scalping, the Impact of the spread on profitability is significant. |
While spreads still affect profitability in normal trading strategies, the impact is generally lower compared to scalping. |
Broker Fees |
High brokerage fees due to the large volume of trades. |
Lower brokerage fees since they execute fewer trades. |
Time Horizon |
Extremely short-term time horizon, with trades lasting only seconds to minutes. |
Broader time horizon, ranging from short to medium-term. |
Risk Exposure |
Due to high frequency of traders, scalping is more risky. |
Risk exposure is lower comparatively here as traders have more time to analyse market conditions. |
Psychological Pressure |
Mentally more demanding due to the rapid decision making required and the pressure to execute trades quickly. |
Less psychological pressure since traders have more time to analyse the market conditions and make trading decisions. |
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