I am often asked which is best for price action trading, scalping or swing trading? To be perfectly honest, price action trading works equally well for either strategy, but we have developed a technique that includes both scalping and swing trading, and when used together, we increase our win percentages exponentially, while also reducing our market risk rather quickly. We call this strategy our scalp and run technique, and while it may sound complicated, it’s really rather simple to implement. This strategy serves two purposes: 1) It allows us to remove all risk in a trade with only a meager 5 ticks of movement in our favor, yet at the same time, it allows us to create swing trades on those trades that move much further. 2) It also allows us to be scalpers first, while still giving us a chance to swing trade the best entries that take off quickly and move for long distances.
While we have some specific rules that we follow when using our scalp and run technique, there are also different ways that you can change those rules up ever so slightly to push yourself further in the scalping direction or further in the swing trade direction. You see, we think your trading personality should be the most important factor when it comes to deciding if you should be a scalper or swing trader, so don’t ignore the importance of this idea. As an example, I prefer to be a scalper, as I am very good at picking short term moves. I just enter and exit quickly, and then look for another entry to set up soon thereafter.
For some reason, it’s really difficult for me to enter a trade and watch it go into profit, only to see prices back up and that profit disappear. To catch a really good swing trade, you might have to watch a trade go in and out of profit multiple times before prices can move very far in your favor, and then also, you might watch a nice swing trade go into profit only to see it turn into a loser in the end. This very problem is what lead me to begin using my strategy that I call “scalp and run.” What I prefer to do is always scalp out a portion of my trade, say one contract on 4 ticks, which nets you $50.00 per contract in the ES, then hold onto one additional contract, while moving the stop to break even on it in case I catch a big move. If I’m correct, that additional contract becomes a swing trade. If I’m wrong, I still make money on the scalp portion of my trade and lose nothing on the runner.
On the other hand, many traders find it very difficult to jump in and out of the market multiple times. They would prefer to enter and just stay with a trade as long as possible, so for these types, swing trading is obviously going to suit their personality better than scalping. Figure out what you are most comfortable doing and stick with it, because one of the secrets to trading is to be comfortable in your strategy and style, as that reduces the mental and emotional stresses that lead to mistakes and ultimately to losses. The hardest part of trading is fighting those mental demons that talk you into bad trades and out of entering good trades. If you are comfortable with your trading technique, you will be less inclined to make mental mistakes.
When it comes to the scalp and run technique, what I have found is that I will get stopped out on the runner about 50% of the time for no gain, but when I do catch a runner, they are often good for many, many points and really big profits. There are many ways you could actually modify the strategy slightly in order to move further towards scalping or swing trading. If you want to be a pure scalper, you could just scalp out in full on 4 ticks on every trade. You would be surprised at how well you can do scalping if you follow our price action strategies that we teach. Our best traders have an 80% to 90% win rate in the ES, which we often hear people say is impossible, but we know better because we see it happening in real time!
On the other hand, if you want to be more of swing trader, you can adjust our strategy slightly and still reduce your risk while helping insure you get into some really good swing trades. As an example, a swing trader might scalp out of one contract after 4 ticks, and then move your stop to break even for the entire trade, using your scalp profits to help give you some room for your runners or swing contracts. This would serve the same purpose of reducing your risk after four ticks only, while still giving you some room on the trade without any further risk. There are several different ways you can approach our scalp and run techniques, so you are limited only by your imagination and what you are attempting to do overall with your trading.
In the end, it’s up to you to determine which is best for price action trading, scalping or swing trading? Remember what we told you earlier, your strategy must fit your personality. Whatever style you choose in the end, the bottom line is that you must have a proven winning strategy or you will never make any money as a day trader. If you would like to learn our proven and reliable price action trading strategies, then you can find more information on this at http://priceactiontradingsystem.com/pats-price-action-trading-manual.