Scalping

An ultra-short-term trading strategy that seeks to profit from very small price movements, typically holding positions for seconds to minutes and executing many trades per session.

Scalping is the most active form of day trading. Scalpers attempt to capture tiny price movements — sometimes just a few cents per share — by entering and exiting positions very rapidly. They rely on high trading volume and leverage to generate meaningful profits from these small moves, executing dozens or even hundreds of trades in a single trading day.

Successful scalping requires real-time Level 2 quotes (showing the full order book), fast execution infrastructure, tight bid-ask spreads, and extreme mental discipline. Scalpers focus almost entirely on price action, order flow, and momentum rather than company fundamentals. Their holding period is so short that macroeconomic factors are essentially irrelevant.

Scalping is extremely difficult to execute profitably after accounting for transaction costs (commissions, bid-ask spreads, and market impact). The strategy has been largely commoditized by high-frequency trading firms with superior technology. Most retail scalpers consistently lose money. It is best viewed as a professional discipline requiring significant experience and technical infrastructure rather than a viable strategy for most investors.

This definition is for informational and educational purposes only. Nothing on Finance Compass constitutes financial, investment, or trading advice. Always conduct your own research and consult a qualified professional before making financial decisions.