Scalp Trading

Small profits, low risk

Take advantage of daily volatility.

Scalping is a day trading strategy where traders buy and sell assets multiple times a day, usually ones with high volatility, like penny stocks or cryptocurrency. This way, several small gains can add up to significant income. Scalp trading generally has a short window of opportunity compared to other strategies.

This strategy can take the form of scalping or scalp trading. The major difference between the two is that scalping is done almost exclusively with small-cap stocks, while Scalp Trading can be completed with any assets.

Scalp traders look at the nuances of how an asset trades during the day—using that information to try to capture 2% or 3% in profit from each trade. Scalpers also take advantage of 'spikes' in volume when they occur. A spike happens when there's an unusual increase in trading volume for a particular period. Because of this reliance on asset spikes, scalping has a short window to be executed successfully. Most successful scalp trades are completed within 1-5 minutes of asset spikes occurring, while in some instances, scalping opportunities can last for hours.

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Play the market

If a specific news announcement causes large amounts of market participants to buy or sell, scalpers will jump into the market with their orders during this event. Scalpers will then get back out of the market once they feel that the spike in trading volume has disappeared.

This means that Scalpers often use news events and 'breakouts' to trade and then quickly get back out once their analysis tells them that it's time to close their position. Remember though that scalping is challenging to master as it requires a lot of attention and understanding of the market.

Scalping was made famous by traders in the Forex markets but can be completed using almost any asset or security where liquidity exists. The strategy is most effective when trading instruments with small spreads and slight differences between buying and selling prices (i.e., low commissions). Scalping works best with Forex and other financial futures contracts such as stock indexes, stock options, commodity futures contracts, etc.