Scalping — Trading Wiki

What Scalping means

Ultra-short-term trading capturing tiny price movements (seconds to minutes). Requires low-latency execution, tight spreads, and relentless discipline.

In depth

Scalping is an ultra-high-frequency trading style where traders aim to profit from very small price movements — typically a few cents on stocks or a few ticks on futures — by entering and exiting positions within seconds to minutes. Scalpers execute dozens to hundreds of trades per session, accumulating small profits that compound into meaningful returns through sheer volume. The strategy demands the lowest-latency execution infrastructure, the tightest possible bid-ask spreads, the lowest commissions, and an extraordinarily disciplined mindset.

Scalpers typically use the order book (Level 2 data), time and sales (the tape), and very short-term charts (1-minute or tick charts) to identify micro-opportunities. Common scalping setups include order flow imbalances (when buy orders significantly outnumber sell orders at a price level), support/resistance bounces on the 1-minute chart, and opening range breakouts during the first 15 minutes of the trading session. The risk-reward on individual scalp trades is typically tight — often 1:1 or 1:1.5 — but the win rate needs to be high (60-70%+) for the strategy to be profitable after commissions.

Commission costs are the critical variable in scalping profitability. Because each trade captures only a few cents per share, commission and spread costs represent a significant percentage of gross profits. Scalpers typically require direct market access (DMA), per-share commission structures (rather than per-trade), and accounts with exchanges or brokers that offer maker-taker rebates.

Key points

• Captures tiny price movements over seconds to minutes
• Requires extremely low latency, tight spreads, and low commissions
• High win rate (60%+) needed to overcome transaction costs

Practical tip

Scalping is not for beginners — period. If you insist on trying, start by scalping only the first and last 30 minutes of the trading day when volatility is highest. Use a commission-free simulator first, then switch to a per-share commission broker. Track your average profit per trade minus commissions — if it's less than 2x your average commission, the strategy isn't viable.

Why it matters when you are learning

Scalping is the Formula 1 of trading — thrilling but unforgiving. Master slower styles first; scalping rewards only the most disciplined traders.

Practising Scalping on the simulator

Reading about Scalping and using it are different skills. Try it once in the simulator on an instrument you already follow, write down beforehand what you expect to happen, and check the journal a day later to see whether it played out that way. Educational simulation only — not financial advice.