Intraday trading versus scalping are quite different.  One is quick and fast and the other is slow and patient.   Yet, many new traders begin as scalpers only to find that they lose lots of money really quickly.  The main reason they gravitate towards scalping is the low risk entries.  However, today provided great examples of both types of trading on the Dow Jones, S&P 500, Gold, and Crude.

Intraday Trading versus Scalping – Results

The three minute chart below shows the three entries generated this afternoon on the Dow Jones.  Each one was risking fifteen ticks on initial entry.  After three trades the total profit was 156 points.  The total risk on all three trades combined was forty-five ticks.  Basically, the risk to reward on these trades was 1 : 3.46.

Scalping DowNow let’s compare that with the 45 minute chart.  The 45 minute chart shows that price has retraced to the Average True Range stop (same entry methodology that was used to enter trades on the three minute chart).  Total risk on the 45 minute chart was fifty points.  Total profit was 172 points, slightly higher than the three trades on the three minute chart.  Risk to reward on this trade was 1 to 3.44 (almost the same).  So what is the difference?

Intraday Trading versus ScalpingThe difference today between intraday trading versus scalping is that it was a great trending day.  Trading either timeframe would more than likely produce profits.  The three minute trade produced three good entries and you paid commissions on three good trades.  The forty-five minute chart only produced one trade, you paid commission on one versus three and you stayed with the trade all afternoon.  After paying commissions the forty-five minute chart was the better choice.

  • Based on trading one contract, profits on three minutes trades were $765 after calculating commissions ($5 per trade).  This would make your actual risk to reward 1 to 3.4.
  • Based on trading one contract, profits on forty-five minute was $855 after calculating commission ($5 per trade).  This would make your actual risk to reward 1 to 3.71.

However, the biggest difference is that on non-trending days the three minute would have a lot more noise and create more whipsaw trades that would cost you the profits you made today.  For five additional points, intraday traders would just simply choose the forty-five minute chart because it’s less noisy and produces fewer trades but the trades tend to be better.

The S&P 500, Crude, and Gold all have excellent examples of price being at an ATR on a higher timeframe for intraday trading and each had entries on the three minute charts, as well.  Deciding whether to choose intraday trading versus scalping was just a preference for your personality more than anything today.

Of course, it is also a matter of trading personality.  The older I get, the less scalping I like to do.  I am more inclined to simply wait for the higher timeframe to reach the ATR and take trades there as it requires less work and stress.